Question

Jessica’s bank is offering her a loan with a stated rate of 4.90% interest. If the interest is compounded every two months, what will Jessica really pay for interest?
a.
4.90%
b.
5.00%
c.
5.01%
d.
4.96%


Please select the best answer from the choices provided

A
B
C
D

Answer 1

B

Effective annual rate = (1 + 0.049/6)^6 − 1 ≈ 0.05001137 ≈ 5.00%