Question
Reuben has the option of receiving a loan of $9,875 for 14 years at an interest rate of either 4.61% compounded monthly or 4.61% compounded
Reuben has the option of receiving a loan of $9,875 for 14 years at an interest rate of either 4.61% compounded monthly or 4.61% compounded semi-annually.
a. What would be the accumulated value of the loan at the end of the term, if it was received at the interest rate of 4.61% compounded monthly?
b. What would be the accumulated value of the loan at the end of the term, if it was received at the interest rate of 4.61% compounded semi-annually?
c. How much more interest would Reuben have to pay if he chose the monthly compounding interest rate intead of the semi-annually compounding rate?
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