You need to borrow $1000 for an emergency. You have two alternatives. One is to borrow from a bank. The other is to borrow from your childhood friend Greta Ganav, who is in the “private” financing business. Because you and Greta go way back, she will give you her preferred rate, which is $5/week until you pay back the entire loan.

1. What is Greta’s effective annual interest rate?

2. Your alternative is to borrow from a bank, where the interest is compounded monthly. What nominal interest rate would make you choose the bank over Greta?

3. If the bank’s interest rate is 7% p.a., compounded monthly, how many months would it be until the interest paid to Greta equaled the interest paid to the bank?