The APR on a loan is 13.45%, compounded monthly. What is the effective semi-annual rate? Select...

The APR on a loan is 13.45%, compounded monthly. What is the effective semi-annual rate?

Select one:

a. 6.725%

b. 6.916%

c. 7.225%

d. One cannot compare rates with different compounding frequencies.

Expert Solution

Answer is (b) : 6.916%

Value	100
Rate	13.45%
Month	Interest	Cumulative Interest
1	1.121	1.121
2	1.133	2.254
3	1.146	3.400
4	1.159	4.559
5	1.172	5.731
6	1.185	6.916
7	1.20	8.11
8	1.21	9.33
9	1.23	10.55
10	1.24	11.79
11	1.25	13.04
12	1.27	14.31

jeff jeffy answered 2 years ago

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