Miller Company is able to arrange financing at either a rate of 10.50% annually, or at a rate of 10% compounded quarterly. Assuming financing is needed for one year, which rate is the best? 10.50% annually, because the annual percentage yield for 10% compounded quarterly is greater than 10.50%. 10% compounded quarterly, because the annual percentage yield is 10.38%. 10.50% annually, because even though the annual percentage yield is higher, interest if paid only once per year at year end. Both rates are effectively the same, so Miller should be indifferent between the two.

Miller Company is able to arrange financing at either a rate of 10.50% annually, or at a rate of 10% compounded quarterly. Assuming financing is needed for one year, which rate is the best? 10.50% annually, because the annual percentage yield for 10% compounded quarterly is greater than 10.50%. 10% compounded quarterly, because the annual percentage yield is 10.38%. 10.50% annually, because even though the annual percentage yield is higher, interest if paid only once per year at year end. Both rates are effectively the same, so Miller should be indifferent between the two