Your uncle's company is considering financing for its new office building.  He has asked you to help him select the bank, based on the terms they are offering. Bank A has offered to lend the required funds on a loan where interest must be paid quarterly, with a quoted rate of 6%.  Bank B insists on monthly payments, also with a quoted rate of 6%.  What is the difference in the effective annual rate charged by the two banks?  Which bank should your father's company do business with?

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To compare the effective annual rates charged by Bank A and Bank B we need to convert their quoted r... View the full answer