Polymath Associates arranged a $9 million revolving credit agreement with a group of banks. The firm must pay an annual commitment fee of 0.25% on the unused balance of the loan commitment. On the used portion of the revolver, it must pay 1.25% above the prime rate. The prime rate is expected to be 4.0% over the year. The firm faces a compensating balance requirement of 12% and its normal deposit balance is $100,000. If the firm borrows $7 million immediately once the revolver is signed, and repays at the end of one year, what is the AFC of the revolver? Select the closest answer.

A. 5.34%

B. 5.11%

C. 6.26%

D. 5.96%

E. 6.08%