You are comparing two investments. The first pays 2 percent interest per month, compounded monthly, and the second pays 7 percent interest per six months, compounded every six months.

1. What is the effective semiannual interest rate for each investment?

2. What is the effective annual interest rate for each investment?

3. Based on the interest rates, which investment is preferred? Does the decision depend on whether the comparison is based on an effective six-month rate or an effective one-year rate?