7. Suppose your local bank offers a CD rate of 8% (APR), compounded quarterly. What continuously compounded rate offers the same economic return?

9. Easterwood Credit Corp. wants to earn an effective annual return on its consumer loans of 16.4 percent per year. The bank uses daily compounding on its loans. What is the APR that the bank is required by law to report to potential borrowers? Explain why this rate is misleading to an uninformed borrower.

11. You are looking at a one-year discount loan of $20,000. The interest rate is quoted as 6.25 percent plus 2 points. A point on a loan is 1 percent of the loan amount. (Quotes similar to this are common with home mortgages.) The interest rate quote in this example requires the borrower to pay 2 points to the lender up front and repay the loan later with 6.25 percent interest on the $20,000 borrowed. What (effective) rate (EAR) would you actually be paying?