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On January 1, 2010, Lynn Company borrows $2,000,000 from National Bank at 11% annual interest.

On January 1, 2010, Lynn Company borrows $2,000,000 from National Bank at 11% annual interest. In addition, Lynn is required to keep a compensatory balance of $200,000 on deposit at National Bank which will earn interest at 5%. The effective interest that Lynn pays on its $2,000,000 loan is

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