Koopman's Chickens, Inc

Multiple Choice

Koopman's Chickens, Inc. plans to borrow $275,000 from its bank for one year. The rate of interest is 9%, but a compensating balance of 20% is required. What is the effective rate of interest?

A) Less than 11.4%
B) More than 11.4% but less than 11.6%
C) More than 11.6% but less than 11.8%
D) More than 11.8%