Scan Bookkeeping has a $$200,000$ compensating balance loan with its bank. The terms of the loan

call for Scan to keep $5\%$ of the loan as a compensating balance and pay interest at an annual rate of

$6\mathrm{.}50\%$ on the entire amount. If the firm borrows the maximum amount for one year, what is the EAR on

this loan?

A$)6\mathrm{.}99\%$

B$)6\mathrm{.}50\%$

C$)6\mathrm{.}35\%$

D$)6\mathrm{.}84\%$