Tangshan Mining Borrowed $100,000 for One Year Under a Revolving

Multiple Choice

Tangshan Mining borrowed $100,000 for one year under a revolving credit agreement that authorized and guaranteed the firm access to $200,000. The revolving credit agreement had a stated interest rate of 7.5 percent and charged the firm a 1 percent commitment fee on the unused portion of the agreement. Based on this information, the effective annual interest rate on the loan is ________.

A) 7.5%
B) 8.0%
C) 8.5%
D) 9.0%