Answer: To determine which loan(s) meet Jeremy's criteria of no more than an effective rate of 7.000% annually, we need to calculate the effective rate for each loan.
The effective rate is the true annual interest rate that a borrower will pay on a loan, taking into account the frequency of compounding.
Loan A: 6.785% normal rate compounded semi-annually
To calculate the effective rate, we can use the formula:
(1+ (nominal rate/2))^2 - 1
Effective rate = (1+ (6.785/2))^2 - 1 = 6.897%
Loan B: 6.795% nominal rate compounded, manually
Since the loan is compounded manually, the effective rate is the same as the nominal rate.
Effective rate = 6.795%
Loan C: 6.659% nominal rate, compounded weekly
To calculate the effective rate, we can use the formula:
(1+ (nominal rate/number of compounding periods per year))^(number of compounding periods per year) - 1
Effective rate = (1+ (6.659/52))^52 - 1 = 6.759%
Since 6.897% > 7.000% and 6.795% > 7.000% and 6.759% < 7.000%. So Loan C with 6.659% nominal rate, compounded weekly meets Jeremy's criteria.
Explanation: