Jessica’s bank is offering her a loan with a stated rate of 4.90% interest. if the interest is compounded every two months, what will jessica really pay for interest? a. 4.90% b. 5.00% c. 5.01% d. 4.96%

Option B is correct, i.e. 5.00%

Step-by-step explanation:

Given that Jessica’s bank is offering her a loan with a stated rate of 4.90% interest and the interest is compounded every two months.

It means compounding periods, n = 6.

Suppose Principal loan amount = P = $100.

Future value, FV = P(1 + r/n)^(nt)

FV = 100*(1 + 4.9/600)^6 = 105.0011377 ≈ $105.

For a $100 loan, She pay interest = $5.

Hence, the effective interest rate = 5%.

(-5,-28)

i graphed to on desmos.