Your company has arranged a revolving credit agreement for up to $62 million at an interest rate of 1.31% per quarter. The arrangement also requires your company to maintain a compensating balance of 4% of the unused portion of the credit line, to be deposited in a non-interest-bearing account. your companies short term investment account at the same bank pays an interest rate of .45 per quarter. What is the effective annual interest rate if your company does not use the revolving credit agreement during the year?

a) 1.81%

b) 1.99%

c) 5.34%

d) 2.66%

e) 2.28%