Your firm needs to borrow $$1\mathrm{.}0$ million for one year. The firm has no other short term borrowings and it's combined state and federal tax rate is $25\%.$ Your banker offers several lending alternatives. Which one will you choose?

Select one:

a$.$

$5\mathrm{.}00\%$ discount interest

b$.$

$5\mathrm{.}50\%$ simple interest

c$.$

$5\mathrm{.}05\%$ simple interest with a $20\mathrm{.}00\%$ compensating balance

d$.$

$5\mathrm{.}00\%$ simple interest with a $18\mathrm{.}00\%$ compensating balance