Use of Financial Calculator TI BA II Plus Required

question 99

Multiple Choice

Use of Financial Calculator TI BA II Plus required. Beth wants to borrow $18 000 for five years and she has a choice of two loans. One carries an annual rate of 10 percent and the other a 9.5 percent rate compounded semi-annually. Which is her best choice? Calculate the answer by comparing the effective annual rates of interest.

• A)The effective annual rate is 10.2 percent, so the 10 percent annual loan is the best choice.
• B)The effective rates to compare are 9.72 percent and 10 percent, so the semi-annual 9.5 percent loan is the better choice.
• C)The effective rates to compare are 9.09 percent and 8.56 percent, making the 10 percent loan the better choice.
• D)The 9.5 percent semi-annual effective rate is 9.92 percent, making that loan the best choice.

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