Your parents have recently taken out a 20-year loan for $400,000 towards a home renovation project. They've asked you to help them with their finances given your recent completion of the Finance course.

The loan payments are quarterly (every 3 months). The APR is 12%, compounded quarterly. Your parents have asked you to calculate the quarterly and annual payments that they need to budget for. To determine this, which rate do you need to use to calculate the quarterly and annual payments, respectively?

a.

Quarterly = EAR k; Annual = APR

b.

Quarterly = APR k; Annual = EAR

c.

Quarterly = APR; Annual = EAR

d.

Quarterly = EAR; Annual = APR