The R&M Bank Has Offered You the Choice Between Two

question 23

Multiple Choice

The R&M Bank has offered you the choice between two loans:
#1 charges interest at a rate of 9% compounded quarterly.
#2 charges interest at a rate of 9.50% compounded semi-annually.
Which loan do you prefer and why?

• A) #1, lower effective rate
• B) #2, lower effective rate
• C) #1, higher effective rate
• D) #2, higher effective rate

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