First National Bank charges 10.7 percent compounded monthly on its business loan

Question

First National Bank charges 10.7 percent compounded monthly on its business loans. First United Bank charges 10.9 percent compounded semiannually.

Calculate the EAR for each bank. (Enter rounded answers as directed, but do not use rounded numbers in intermediate calculations. Enter your answers as a percent rounded to 2 decimal places (e.g., 32.16).)

Requirement 1:

Calculate the EAR for each bank. (Enter rounded answers as directed, but do not use rounded numbers in intermediate calculations. Enter your answers as a percent rounded to 2 decimal places (e.g., 32.16).)

Requirement 2: As a potential borrower, which bank would you go to for a new loan? Requirement 1: Calculate the EAR for each bank. (Enter rounded answers as directed, but do not use rounded numbers in intermediate calculations. Enter your answers as a percent rounded to 2 decimal places (e.g., 32.16).) EAR First National Bank First United Bank Requirement 2: As a potential borrower, which bank would you go to for a new loan? (Click to select 7 (Click to select) First National Bank lst Uniicod lBank RETETETTceseBook & Resources

Explanation / Answer

1)

EAR:

First national bank = (1+(10.7%)÷12)^12-1 = 11.24%

First united bank = (1+(10.9%)÷2)^2-1 =11.2%

2)

I will choose First united bank

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