5. A mortgage company quotes a lending rate of 7% APR with monthly repayments (that is, monthly compounding) or 741% with payments once every year. Which is the better deal for the borrower? (a) Pay once a month (b) Pay once a year (c) Both are equivalent (d) The two deals cannot be compared Answer for (5) 6. (Note: Full computations are not necessary for this problem. The mumbers are just a useful guide to think through the problem). Today is Anita's birthday and she is planning for retirement. She wishes to have an annual income of $50,000 per year for 20 years starting exactly one year from now. She receives her income once a year, and always on her birthday. She has decided that at the current interest rate (which is x% ) she should set aside $600,000 today to achieve her retirement income goal. As she is walking to the bank to deposit the funds with her banker, she learns that the interest rate has gone up above %. Which of the following statements is true? (a) Anita will need to set aside more than $600,000 because the interest rate has gone up. (b) Anita will need to set aside less than $600,000 because the interest rate has gone up. (c) Anita will need the same $600,000 because her income requirement has not changed. (d) We cannot say whether Anita needs to set aside more or less money than $600,00 because we do not know the original interest rate