In order to open up your new business you need to take out a loan.First Bank charges 6% compounded quarterly,and Second Bank charges 6.5% compounded semi-annually.From which bank would you prefer to obtain your loan?
A) First Bank
B) Second Bank
C) Indifferent

Question

Quizplus · Accepted Answer

Effective interest rate = 11ea7fdb_fc29_93cf_a768_b14726ff263f_TB2902_00 - 1
Effective interest rate for First Bank = 11ea7fdb_fc29_93d0_a768_73beef6173d5_TB2902_00 - 1 = 6.14%
Effective interest rate for Second Bank = 11ea7fdb_fc29_93d1_a768_c1dce523ed5c_TB2902_00 - 1 = 6.61%

In Order to Open Up Your New Business You Need