Hammond Motors Is Considering Using a Public Warehouse Loan as Part

Multiple Choice

Hammond Motors is considering using a public warehouse loan as part of its short-term financing.The firm will require a loan of $2 million for three months.Interest on the loan will be 12% (APR,compounded quarterly) to be paid at the end of the quarter.The warehouse charges 1% of the face value of the loan,payable at the beginning of the quarter.The effective annual rate on this loan is closest to:

A) 9.3%.
B) 11.3%.
C) 15.2%.
D) 17.1%.