Your bank offers you a $100000 line of credit with an interest rate of 2.5% per quarter. The loan agreement also requires that 4% of the unused portion of the
credit line be deposited in a non-interest bearing account as a compensating balance. Your short-term investments are paying 1.25% per quarter. What is your
effective annual interest rate if you borrow the whole $100000 for the entire year? Assume that both the funds you borrow and the funds you invest use
compound interest. (Please show work so that I may be able to understand the rationale behind the answer)