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The Roadside Inn borrowed $100,000 for two years at an annual interest rate of 10% from a bank that required a $20,000 compensating balance. What

The Roadside Inn borrowed $100,000 for two years at an annual interest rate of 10% from a bank that required a $20,000 compensating balance. What was the effective interest rate for the loan?

a. 10%

b. 12%

c. 12.5%

d. 14%

Please explain your answer

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