You are offered two loan options which you must choose between. Federal Bank offers to charge you 8% compounded annually. State Bank offers to charge you 7.8% compounded monthly. Which of the following is true? You should choose Federal Bank because it has an effective annual rate of 8%. You should choose State Bank because the interest rate is compounded more often. You should choose Federal Bank because the nominal rate is higher. You should choose State Bank because the nominal rate is lower. You should choose State Bank with an effective annual rate of 8.08%.

You are offered two loan options which you must choose between. Federal Bank offers to charge you 8% compounded annually. State Bank offers to charge you 7.8% compounded monthly. Which of the following is true? You should choose Federal Bank because it has an effective annual rate of 8%. You should choose State Bank because the interest rate is compounded more often. You should choose Federal Bank because the nominal rate is higher. You should choose State Bank because the nominal rate is lower. You should choose State Bank with an effective annual rate of 8.08%.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 15P

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