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Your company has arranged a revolving credit agreement for up to $63 million at an interest rate of 1.32 percent per quarter. The agreement also

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Your company has arranged a revolving credit agreement for up to $63 million at an interest rate of 1.32 percent per quarter. The agreement also requires your company to maintain a compensating balance of 5 percent of the unused portion of the credit line, to be deposited in a non-interest bearing account. Your company's short-term investment account at the same bank pays an interest rate of .46 percent per quarter. What is the effective annual interest rate if your company does not use the revolving credit arrangement during the year? Multiple Choice 2.72% 5.39% 1.85% 2.04%

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