In exchange for a $450 million fixed commitment line of credit, your firm has agreed to do the following:
1. Pay 2.0 percent per quarter on any funds actually borrowed.
2. Maintain a 4 percent compensating balance on any funds actually borrowed.
3. Pay an up-front commitment fee of 0.150 percent of the amount of the line.
Based on this information, answer the following:
a. Ignoring the commitment fee, what is the effective annual interest rate on this line of credit?