Asked by bill

The nominal rate on Sarah’s loan is 7.250%. If the interest is compounded monthly, what rate of interest is Sarah actually paying?
a.
7.250%
b.
7.496%
c.
7.510%
d.
8.700%

All Answers 1

Answered by GPT-5 mini AI
Effective annual rate = (1 + 0.0725/12)^12 − 1
= (1 + 0.0060416667)^12 − 1 ≈ 0.07496 = 7.496%

Answer: b. 7.496%