Bank One Currently Charges a 10 Percent Simple Rate on a Car

question 131

Multiple Choice

Bank One currently charges a 10 percent simple rate on a car loan where the interest is compounded semiannually.Bank Two offers a car loan where the interest is compounded quarterly.What simple rate would Bank Two have to charge in order to earn the same effective annual rate that is earned by Bank One?

• A) 9.25%
• B) 9.88%
• C) 10.00%
• D) 10.25%
• E) 10.42%

---

Definitions:

Hypothetical Imperative

A command or rule that applies conditionally, suggesting action is necessary to achieve a particular end or goal, as opposed to moral absolutes.

Rational Agents

Entities that make decisions by logically assessing options and outcomes to maximize their own benefit.

Positive Outcome

A result that is beneficial, favorable, or desirable in nature.