Problem 4. You are given a loan on which interest is charged over a 4-year period, as follows:

• an effective rate of discount of 6% for first year;

• a nominal rate of discount of 5% compounded quarterly for the second year;

• a nominal rate of interest of 5% compounded semiannually for the third year;

  and

• a force of interest of 5% for the fourth year.

Suppose that loan interest for the second year is computed using a nominal rate of discount of 5% compounded every 2 years rather than a nominal rate of discount of 5% compounded quarterly. Calculate the annual effective rate of interest over the 4-year period under this change.