Which of the following one-year $1,000 bank loans offers the lowest effective annual rate? a. A loan with an APR of 6.2%, compounded monthly b. A loan with an APR of 6.2%, compounded annually, that also has a compensating balance requirement of 9,6% (on which no interest is paid) c. A loan with an APR 0f 6.2%, compounded annually, that has a 1.4% loan origination fee. a. A loan with an APR of 6.2%, compounded monthly. (Select from the drop-down menus.) Since the APR is 6.2%, the monthly rate is 0.617% This translates to an effective annual rate of 6.3% b. A loan with an APR of 6.2%, compounded annuaily, that also has a compensating balance requirement of 9.6% (on which no interest is paid) (Select from the drop-down menus.) The compensating balance is $106 Therefore, the borrower will have use of only $894 of the $1,000. The interest is $62 The interest rate per period is 6.9% Since this alternative assumos annual compounding, the effective annual rate is 6.8% as well c. A loan with an APR of 6.2%, compounded annually, that has a 1.4% toan origination fee. (Select from the drop-down menus.) The interest expense is $60 and the loan origination fee is $15. The loan origination fee reduces the usable proceeds of the loan to $987 because it is paid at the beginning of the loan. The interest rate per period is 78% Since the loan is compounded annually in this case, 7.6% is the effective annual rate (Select from the drop-down menu.) Thus, alternative (c) offers the lowest effective annual cost