If you have the option of choosing a loan that will accumulate 4%/ a interest compounded semi-annually compared to a loan that w
ill accumulate 4% /a interest compounded monthly, which one would you choose
1 answer:
Answer:
4%/ a interest compounded semi-annually
Step-by-step explanation:
The option that gives the lower interest rate payment would be more appropriate. to determine this calculate the effective interest rate
Effective annual rate = (1 + APR / m ) ^m - 1
M = number of compounding
(1 + 0.04/2)^2 - 1 = 4.04%
(1 + 0.04/12)^12 - 1 = 4.07%
the choice should be 4%/ a interest compounded semi-annually
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