You Go to Three Different Banks to Borrow $10,000 for One

question 7

Multiple Choice

You go to three different banks to borrow $10,000 for one year.Each says it will lend you the money at 10 percent,but their terms differ as follows: Banks A and C require a single payment at the end of the year.Bank B requires 12 equal monthly payments beginning at the end of the first month.What is the difference between the highest and lowest effective annual rate in this case?

• A) 13.0%
• B) 9.5%
• C) 9.0%
• D) 8.5%
• E) 8.0%

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Definitions:

Bulleted Lists

A list format that includes bullet points for each item, offering clear and concise presentation of information.

Visuals

Graphical elements such as charts, pictures, videos, or diagrams used to supplement text, making content more appealing and easier to understand.

Effective Communication

The ability to convey information to others clearly and unambiguously, ensuring the message is understood as intended.

Scale Distortion

A misrepresentation or alteration of the true size, proportion, or degree of an object or concept, especially in visual representations.