Question
Question 6: For each of the following, compute the implied EAR: 1. Bank A pays 7.1% interest on their premium savings account, paid annually, while
Question 6: For each of the following, compute the implied EAR:
1. Bank A pays 7.1% interest on their premium savings account, paid
annually, while Bank B offers 6.9%, but paid monthly. Which is the
better deal?
2. A traditional borrowing scheme stipulates that you can borrow any
multiple of $20, provided you pay back $21 (for each $20 borrowed) one
week later.
3. Last Friday, you borrowed $25 from a friend. Today (Monday), you return
the $25 and buy your friend a drink for $2 as compensation.
4. I recently saw a TV avert from a loan company, in which they gave an
example: if you borrow $120 for 9 days, the cost will be $16.
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