Problem 12.11

The Kellogg Bank requires borrowers to keep an 5 percent compensating balance. Gorman Jewels borrows $340,000 at a 5.0 percent stated APR. What is the effective interest rate on the loan? (Round intermediate calculations to 4 decimal places, e.g. 1.2541 and final answer to 2 decimal places, e.g. 12.25%.)

The effective interest rate on the loan is ..........%.