Mike is looking for a loan. He is willing to pay no more than an effective rate of 8.000% annually. Which, if any, of the following loans meet Mike’s criteria? Loan X: 7.815% nominal rate, compounded semiannually Loan Y: 7.724% nominal rate, compounded monthly Loan Z: 7.698% nominal rate, compounded weekly a. Y only b. X and Z c. Y and Z d. None of these meet Mike’s criteria.

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Answer:

If Mike is willing to pay no more than an effective rate of 8.000% annually, the loans that meet his criteria are loan X and loan Z. Of those two, the lowest would be loan X. I hope the answer will help you :)

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