-You Are Considering Two Loans

question 9

Multiple Choice

-You are considering two loans.The terms of the two loans are equivalent with the exception of the interest rates.Loan A offers a rate of 7.75 percent,compounded daily.Loan B offers a rate of 8 percent,compounded semi-annually.Which loan should you select and why?

• A) A;the effective annual rate is 8.06 percent.
• B) A;the annual percentage rate is 7.75 percent.
• C) B;the annual percentage rate is 7.68 percent.
• D) B;the effective annual rate is 8.16 percent.
• E) The loans are equivalent offers so you can select either one.

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Definitions:

Standard Normal Curve

The standard normal curve is a type of normal curve with a mean of 0 and a standard deviation of 1, used as a reference in probability and statistics.

Probability

A measure of the likelihood that an event will occur, expressed as a number between 0 and 1 where 0 indicates impossibility and 1 indicates certainty.

Z

A statistical measure used in the context of standard deviations to describe the position of a raw score in relation to the mean of a group of scores.

Sex-Linked Traits

Characteristics determined by genes located on the sex chromosomes, often leading to traits that differ between males and females.