• You are offered two loan options which you must choose between.Federal Bank offers to charge you 6% compounded annually.State Bank offers to charge you 5.8% compounded monthly.Which of the following is true?You should choose State Bank with an effective annual rate of 5.96%.

• You should choose Federal Bank because it has an effective annual rate of 6%.

You should choose State Bank because the interest rate is compounded more often.

You should choose Federal Bank because the nominal rate is lower.

• You should choose Federal Bank because the interest is compounded less often.