Bank a Charges a 7

Multiple Choice

Bank A charges a 7.50 percent annual percentage rate and interest is due at the end of the year. Bank B charges a 6.95 percent annual percentage rate and interest must be paid monthly. What is the effective annual rate charged by each bank?

A) Bank A: 7.5 percent, Bank B: 6.95 percent
B) Bank A: 7.76 percent, Bank B: 6.95 percent
C) Bank A: 7.5 percent, Bank B: 7.18 percent
D) Bank A: 7.76 percent, Bank B: 7.18 percent