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Yi wants to borrow money for 3 years. Her bank offers her two options; 1. Take out a 3 year loan with an annual interest
Yi wants to borrow money for 3 years. Her bank offers her two options; 1. Take out a 3 year loan with an annual interest rate of 5%. 2. Take out three 1 year loans. The annual interest rate on the first one year loan is 4%. The annual interest rate on the second one year loan would be 5%. What is the maximum annual (approximate) interest rate that Yi must expect on the third one year loan? Assume that principal and interest are repaid at the end of the loans. a. There is insufficient information to answer this question b. 4% c. 5% d. 6% e. 7%
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