Please use the following facts to analyze this next two questions:

Assume you just received a bill for services you and have the following two payment options:

Option 1:

Pay the entire bill of $600 now

Or

Option 2:

Pay:

$130 now

And

$130 for each of the next 4 months

What annual interest rate (APR) are you paying if you choose Option 2? Assume monthly compounding.

What Effective Annual Rate are you paying if you choose Option 2? Assume monthly compounding.