Use of Financial Calculator TI BA II Plus Required

Multiple Choice

Use of Financial Calculator TI BA II Plus required. Beth wants to borrow $18 000 for five years and she has a choice of two loans. One carries an annual rate of 10 percent and the other a 9.5 percent rate compounded semi-annually. Which is her best choice? Calculate the answer by comparing the effective annual rates of interest.

A) The effective annual rate is 10.2 percent, so the 10 percent annual loan is the best choice.
B) The effective rates to compare are 9.72 percent and 10 percent, so the semi-annual 9.5 percent loan is the better choice.
C) The effective rates to compare are 9.09 percent and 8.56 percent, making the 10 percent loan the better choice.
D) The 9.5 percent semi-annual effective rate is 9.92 percent, making that loan the best choice.