Riverside Bank offers to lend you $50,000 at a nominal rate of 6.5%, compounded monthly. The loan (principal plus interest) must be repaid at the end of the year. Midwest Bank also offers to lend you the $50,000, but it will charge an annual rate of 7.0% with annual compounding. Whats the difference in the effective annual sales charged by the two banks?

How to solve it? Specifically, what does it mean the following "but it will charge an annual rate of 7.0% with annual compounding"?