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7. You plan to borrow money to buy a snowmobile. You find the following three banks that offer the same APR and the same tota

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A) Bank A which compounds quarterly

There is an direct relationship between compounding periods and effective annual rates. The lower the compounding period, lower will be the EAR. Compounded quarterly has 4 periods, compounded monthly has 12 periods and compounded daily will have 365 periods. Therefore, a loan with quarterly compounding will be cheaper than monthly and daily compounding.

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