Which loan would have the higher effective annual rate what, Financial Management

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Which loan would have the higher effective annual rate what

Amy B. & Victoria A. Corporation is considering two loans one-year maturities and identical face values:

- An 10% loan with a 3% loan origination fee, and

- An 12% with a 1% (no-interest) compensating balance requirement.

Which loan would have the higher effective annual rate? What is your recommendation to Amy B. & Victoria Co.? Why? (Show calculations & cash flow on a timeline)

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Financial Management: Which loan would have the higher effective annual rate what

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