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Luther Industries Is Offered a $1 Million Loan for Four

Question 42

Multiple Choice

Luther Industries is offered a $1 million loan for four months at an APR of 9%.If Luther's bank requires that the firm maintain a compensating balance equal to 10% of the loan amount in a non-interest-earning account,then the effective annual rate EAR for this loan is closest to:


A) 10.3%
B) 12.6%
C) 14.4%
D) 71.5%
E) 21.1%

Correct Answer:

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