National Company borrows from a bank a certain loan at a stated discount rate of 12% per annum.  The bank requires 10% of loan as compensating balance in its new checking account.  The loan is payable at the end of 6 months.  The effective interest rate of this loan is   a. 14.29% b. 15.38% c. 27.27% d. 28.21%

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Chapter1: Making Economics Decisions
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National Company borrows from a bank a certain loan at a stated discount rate of 12% per annum.  The bank requires 10% of loan as compensating balance in its new checking account.  The loan is payable at the end of 6 months.  The effective interest rate of this loan is
 
a. 14.29%
b. 15.38%
c. 27.27%
d. 28.21%
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