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ROger wants to open his own bakery. The initial investment required for this project is 9132505000 and Roger is planning on financing it through a
ROger wants to open his own bakery. The initial investment required for this project is 9132505000 and Roger is planning on financing it through a bank loan. After contacting different banks5 Roger should select among the following four offers: a Bank A: 9.8% with weekly compounding a Bank B: 10% with monthly compounding a Bank C: 13.3% with quarterly compounding a Bank D: 13.5% with semiannual compounding. a} Calculate the eEectiye annual interest rate in each case and decide which bank oHers the best rate. [:5 marks} b} The bakery is supposed to last for ve years. Suppose Roger borrows money at the best rate found in part a}. He anticipates that the project is subject to an uncertainty rate of 2%- and that the annual ination rate for this period will be 1.5%. Calculate the appropriate discount interest rate for this project. [:5 marks}
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