Mphela Electronics Needs to Arrange Financing for Its Expansion Program

Multiple Choice

Mphela Electronics needs to arrange financing for its expansion program.Bank A offers to lend Mphela the required funds on a loan where interest must be paid monthly, and the quoted rate is 8 percent.Bank B will charge 9 percent, with interest due at the end of the year.What is the difference in the effective annual rates charged by the two banks?

A) 0.25%
B) 0.50%
C) 0.70%
D) 1.00%
E) 1.25%