Summit Record Company is negotiating with two banks for a $157,000 loan. Fidelity Bank requires a compensating balance of 24 percent, discounts the loan, and wants to be paid back in four quarterly payments. Southwest Bank requires a compensating balance of12 percent, does not discount the loan, but wants to be paid back in 12 monthly installments. The stated rate for both banks is 9 percent. Compensating balances will be subtracted from the $157,000 in determining the available funds in part a.

a-1.	Calculate the effective interest rate for Fidelity Bank and Southwest Bank.(Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)

	Effective Rate of Interest
Fidelity Bank	%
Southwest Bank	%

a-2.	Which loan should Summit accept?
	Southwest Bank Fidelity Bank

b.	Recompute the effective cost of interest, assuming that Summit ordinarily maintains $37,680 at each bank in deposits that will serve as compensating balances.(Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)

	Effective Rate of Interest
Fidelity Bank	%
Southwest Bank	%

c.	Does your choice of banks change if the assumption in part b is correct?
	Yes No