Santa thanks the Mad Hatter and Alice in Wonderland for the information. Santa says, Several interesting characters will join us to discuss Cash Management, Internal Control, and Capital Budgeting.

Snow White was in trouble. The Seven Dwarfs were cash poor. She needed cash to pay the annual operating costs for Snow Whites Castle and Conference Center. She borrowed $2,000,000 for five years at an annual interest rate of 15% from Evil Queen Bank, which required a $200,000 compensating balance. What was the effective interest rate for the loan? (Rounded to the nearest tenth of one percent)

Group of answer choices

13.6%

15.0%

16.7%

18.8%