Exhibit 16-1 You Have Just Taken Out a Loan for $75,000. the $75,000

Multiple Choice

Exhibit 16-1
You have just taken out a loan for $75,000. The stated (simple) interest rate on this loan is 10 percent, and the bank requires you to maintain a compensating balance equal to 15 percent of the initial face amount of the loan. You currently have $20,000 in your checking account, and you plan to maintain this balance. The loan is an add-on installment loan which you will repay in 12 equal monthly installments, beginning at the end of the first month.
-Refer to Exhibit 16-1.What is the approximate annual interest rate on this loan?

A) 10.00%
B) 16.47%
C) 18.83%
D) 20.00%
E) 24.00%