6. Suppose you can borrow money at 8.6% per year (APR) compounded semiannually or 8.4% per year (APR) compounded monthly. a. Calculate the effective annual rates. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

	Effective Annual Rates
9.60		%
9.00		%

b. Which is the better deal?

9.00% per year (APR) compounded monthly.

9.60% per year (APR) compounded semiannually.

7. a. If the interest rate is 5.6% per year, approximately how long will it take for your money to quadruple in value? (Use the Rule of 72.)

b. If the inflation rate is 3.8% per year, what will be the change in the purchasing power of your money over this period? (Use the Rule of 72 to compute the number of years. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Purchasing power

by

%