Proton manufacturers high-performance battery vehicles. the engineer community to evaluate bids for new generation coordinate measuring machinery for the vehicle components. Two bids include the interest rate that vendor will charge on unpaid balances. To geta clear understanding, of finance cost, the management asked the engineer to determine the effective annual rate for each bid. There are two bids as follows:

Bid 1: 12% per year compounded semi-annually.

Bid 2: 12% per year, compounded quarterly.

Required:

(i) Calculate the Effective Annual Rate (EAR) for each bid. [3 marks]

(ii) Identify which bid will be accepted for a loan interest borrow AND justify the reason. [2 marks]