Last National Bank is offering you a loan at 10%; payments on the loan are to be made monthly.Credit Onion is offering you a loan where payments are to be made semiannually; the rate on the loan is also 10%.Local Bank down the street is also offering a loan at 10% where the payments are made quarterly.Which loan has the lowest annual cost?

Question

Quizplus · Accepted Answer

Credit Onion's loan has the lowest annual cost because it is compounded semiannually (twice a year) while the other loans are compounded monthly or quarterly. This means that the interest on Credit Onion's loan will be lower compared to the other options, resulting in a lower total cost over the life of the loan.

Last National Bank Is Offering You a Loan at 10%;