Your companys management wants to borrow $5 million by setting up a line-of-credit agreement with a commercial bank. The banks commercial loan officer offers the following terms: 11% annual interest and a compensating balance of $1 million. Calculate the effective annual rates given the following possible results of your companys negotiations:

(A)The officers offer stands and the terms remain at 11% with $1 million compensating balance. Your firm normally maintains $1 million in its checking account.

(B)The officers offer stands and the terms remain at 11% with $1 million compensating balance. Your firm normally maintains $750,000 in its checking account.

(C)The officer accepts the terms at 10% with 18% compensating balance. Your firm normally maintains $750,000 in its checking account.

(D)The officer accepts the terms at 10.5% with17% compensating balance. Your firm normally maintains $600,000 in its checking account.