Question

National Bank offers a loan at 13.5% per year, compounded weekly (Assuming there are 52 weeks per year). United Bank offers a loan at 13.7% per year, compounded semi-annually. If you are going to borrow money from one of these two banks, which bank you should go for

Answer 1

Answer:

United Bank

Explanation:

assuming that I need to borrow $1,000, if I borrow money from:

National Bank, interest + principal due in one year = $1,000 x (1 + 0.002596)⁵² = $1,144.34

weekly interest rate = 0.2596%

United Bank, interest + principal due in one year = $1,000 x (1 + 0.0685)² = $1,141.69

semi annual interest rate = 6.85%

Since the amount of money owed to United Bank is lower, then I should go there.