Answer:
The difference in the effective annual rates charged by the two banks is:
0.7%.
Explanation:
a) Data and Calculations:
ABC Bank lending = $1,000
Rate of interest = 8% compounded monthly
Effective monthly rate of interest = 8%/12 = 0.667
FV (Future Value)	$1,083.00
PV (Present Value)	$1,000.00
N (Number of Periods)	12.000
I/Y (Interest Rate)	0.667%
PMT (Periodic Payment)	$0.00
Starting Investment	$1,000.00
Total Principal	$1,000.00
Total Interest	$83.00
Effective annual interest rate = $83/$1,000 * 100 = 8.3%
Bank XYZ lending = $1,000
Rate of interest = 9% annually
FV (Future Value)	$1,090.00
PV (Present Value)	$1,000.00
N (Number of Periods)	1.000
I/Y (Interest Rate)	9.000%
PMT (Periodic Payment)	$0.00
Starting Investment	$1,000.00
Total Principal	$1,000.00
Total Interest	$90.00
Effective annual interest = 9%
Difference in rates = 9% - 8.3% = 0.7%
b) Bank XYZ charges more interest by 0.7% thank ABC Bank.