Assignment:
Carey Company is borrowing $200,000 for one year at 12 percent from Second Intrastate Bank. The bank requires a 20 percent compensating balance. What is the effective rate for interest? What would the effective rate be if Carey were required to make 12 equal monthly payments to retire the loan? (Amount borrowed - Compensating balance).
Provide complete and step by step solution for the question and show calculations and use formulas.