Question: Consider two loans with a 1-year maturity and identical face values: a 6.7% loan with a 1.97% loan origination fee and a 6.7% loan with

Consider two loans with a 1-year maturity and identical face values: a 6.7% loan with a 1.97% loan
origination fee and a 6.7% loan with a 4.7% (no-interest) compensating balance requirement. How
much would be the effective annual rate for each loan?
Select one:
a. 8.84% and 7.03% respectively.
b. 7.975% and 8.61% respectively.
c. 8.61% and 7.975% respectively.
d. 8.30% and 7.25% respectively.

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