A loan requires quarterly interest payments of 1.25 cents for each euro borrowed. That is, the interest
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A loan requires quarterly interest payments of 1.25 cents for each euro borrowed. That is, the interest rate on the loan is ‘‘5% per year compounded quarterly.’’
(a) What is the effective annual rate of interest payable on the loan?
(b) If the rate quoted is 5% per year compounded continuously instead, what would be the effective annual rate of interest on the loan?
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