25.

Your company is able to arrange financing at either a rate of 10.5% annually, or at a rate of 10.25% compounded quarterly. Assuming financing is needed for one year, which rate is the best?

a.

10.25% compounded quarterly, because the quarterly rate is only 2.5625%.

b.

Both rates are effectively the same, so your company should be indifferent between the two.

c.

10.5% annually because the annual percentage yield for 10.25% compounded quarterly is greater than 10.5%.

d.

10.25% quarterly because the company would save .25% in interest costs.