One Payment Stream Is Being Compared to Another

Multiple Choice

One payment stream is being compared to another. The first option is for $500 semi-annual payments over 5 years at an interest rate of 6% compounded semi-annually. The second option is for $250 quarterly payments over 5 years, with interest compounded quarterly. Determine the nominal rate of interest to be offered on the second option for both options to have equal future values.

A) 4.95%
B) 5.25%
C) 5.65%
D) 6.05%
E) 6.85%