Suppose that a famer planned to borrow $5,400 from the bank and repay the loan at the end of the year. The interest rate at the bank is 7.36% compounded annually.

(i) Calculate the amount of interest paid to the Iron Bank. a. $368.02 b. $397.25 c. $426.54 d. $426.47

e. None of the answers are correct

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(ii) Calculate the effective interest rate at the Iron Bank. a. 7.36% b. 6.82% c. 15.25% d. 7.90%

e. None of the answers are correct

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