Himalaya Trekking is negotiating with Kumari Bank for Rs 400,000 one year loan. Kumari has offered to Himalaya Trekking the following three alternatives: a) A 15 percent interest rate, no…

Himalaya Trekking is negotiating with Kumari Bank for Rs 400,000 one-year loan. Kumari has offered to Himalaya Trekking the following three alternatives: a) A 15 percent interest rate, no compensating balance, and due at the end of the year. b) A 13 percent interest rate, a 20 percent compensating balance and interest due at the end of the year. c) A 11 percent rate, a 15 percent compensating balance, and the loan is discounted. If Himalaya Trekking wishes to minimize the effective Annual Rate (EAR), which alternative will it choose? Why?