Your late grandmother has left you a biannual allowance of 5000 paid twice a year at the end of June and at the end of December for exactly 30 years (total undiscounted amount of 300,000; first payment received in exactly 6 months). The Students Association Bank (SAB) is willing to buy your annuity for 138,377.82. What is biannual interest rate that the bank charges on this loan? What is the effective annual interest rate? (In computational problems, show the basic equation(s) you used to solve the problem. In verbal problems, briefly explain your choice and why you dismissed the other answers)

1. The biannual rate is 3%; the effective annual interest rate is 6.00%
2. The biannual rate is 3%; the effective annual interest rate is 6.09%
3. The biannual rate is 2.9%; the effective annual interest rate is 5.92%
4. The biannual rate is 2.9%; the effective annual interest rate is 6.09%
5. None of the above