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Suppose a company borrows $100 million for a full year at 4.25%. The bank requires 5% as compensating balances, which pay 0 interest. What is

Suppose a company borrows $100 million for a full year at 4.25%. The bank requires 5% as compensating balances, which pay 0 interest. What is the effective interest rate on the loan? Hint: Figure out how much the company really needs to borrow.

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