a swim school is expanding and needs to take out a one-year, $55,000 loan for a new lap pool. bank a says it can give the swim school a 25% annual interest rate compounded once. this is represented with the equation a=55,000(1.25)t. bank b says it can offer the swim school a semi-annual interest rate that will be compounded twice.
in order for the loan at bank b to cost the swim school the same amount, what apr would bank b need to offer?
rewrite the compound interest formula to find the answer.
a) a≈55,000(1.118)2t apr≈47.2%
b) a≈55,000(1.252)2t apr≈25%
c) a≈55,000(1.25)4t apr≈20.8%
d) a≈55,000(1.118)2t apr≈23.6%