Your firm needs to borrow $1.0 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.

5.00% discount interest

b.

5.50% simple interest

c.

5.05% simple interest with a 20.00% compensating balance

d.

5.00% simple interest with a 18.00% compensating balance