ABC Bank charges 12 percent compounded monthly on its business loans. XYZ Bank charges 14 percent compounded semiannually. As a potential borrower, which bank would you go to for a new loan? 2 ABC Corp. wants to earn an effective annual return on its consumer loans of 20 percent per year. The bank uses daily compounding on its loans. What interest rate is the bank required by law to report to potential borrowers? Explain why this rate is misleading to an uninformed borrower. 3 A five-year annuity of 10 $7,500 semiannual payments will begin 10 years from now, with the first payment coming 10.5 years from now. If the discount rate is 6 percent compounded monthly, what is the value of this annuity five years from now? What is the value three years from now? What is the current value of the annuity?