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2. Your friend hears of two great investments. One pays an APR of 8% with annual compounding and one pays 7.8% with quarterly compounding. a.

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2. Your friend hears of two great investments. One pays an APR of 8% with annual compounding and one pays 7.8% with quarterly compounding. a. Calculate the EAR for each investment. (4 points) b. Your friend tells you to choose Option 1 "because it has a higher rate". Is this the right choice? Explain your answer. (6 points)

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