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Suppose you borrow 2,500,000 from a bank for one-half year at a stated annual interest rate of 14 percent, with interest prepaid (a discounted loan).

Suppose you borrow 2,500,000 from a bank for one-half year at a stated annual interest rate of 14 percent, with interest prepaid (a discounted loan). Also assume that the bank requires you to maintain a compensating balance equal to 20 percent of the initial load value. What is the effective annual interest rate are you being charged?

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