Answer:
C) Loan F's effective rate will be 0.302 percentage points lower than Loan G's
Step-by-step explanation:
Formula for effective rate is;
r_eff = [1 + (r/n)]^(n) - 1
Where;
r is interest rate
n is the number of compounding periods per year
Loan F has a nominal interest rate of 5.66%, compounded monthly
Thus: r_eff = [1 + (0.0566/12)]^(12) - 1 = 0.0581
Loan G has a rate of 6.02%, compounded semiannually.
Thus;
r_eff = [1 + (0.0602/2)]^(2) - 1 = 0.0611
Differece = 0.0611 - 0.0581 = 0.003
Converting to percentage gives : 0.003 × 100 = 0.3%
Thus,correct answer is option C
