Problem:
The treasurer for the Macon Blue Sox baseball team is seeking a $20,000 loan for one year from the 4th National Bank of Macon. The stated interest rate is 10 percent, and there is a 15 percent compensating balance requirement. The treasurer always keeps a minimum of $1,500 in the baseball team’s checking accounts. These funds count toward meeting any compensating balance requirements. What will be the effective rate of interest on this loan?