Question $5$

A student needs to borrow $$20,000$ for college expenses. She is considering two options:

Option $1$: APR $=6\%,$ compounded quarterly

Option $2$: APR $=5\mathrm{.}9\%,$ compounded continuously

a$.$ Find the effective rate $($APY$)$ for each loan option. Round to three decimal places.

Option $1$: APY $=$

Option $2$: APY $=$

b$.$ Is Option $1$ or Option $2$ a better option for the student who is wishing to borrow

money? Answer $1$ or $2.$

Option

c$.$ If the student was investing $$20,000$ instead of borrowing $$20,000$ under these same

conditions, which option would be better? Answer $1$ or $2.$

Option