Bank a Charges a 7

Multiple Choice

Bank A charges a 7.75 percent annual percentage rate and interest is due at the end of the year. Bank B charges a 7 percent annual percentage rate and interest must be paid monthly. What is the effective annual rate charged by each bank?

A) Bank A: 7.75 percent, Bank B: 7.23 percent
B) Bank A: 7.85 percent, Bank B: 7.23 percent
C) Bank A: 7.25 percent, Bank B: 7.5 percent
D) Bank A: 7.85 percent, Bank B: 8.15 percent