Questions: Two banks are offering different loan opportunities. Bank A offers a loan that charges 3.1965% interest compounded daily (excluding leap years). Bank B offers a loan that charges 3.2131% interest compounded quarterly. Determine the APY for each to decide which is offering a better loan. Round your answers to 4 decimal places. Enter your answers with 4 decimal places (using zeros if needed) and don't forget to include a percent sign, %, in your answers. APY for Bank A=

Two banks are offering different loan opportunities. Bank A offers a loan that charges 3.1965% interest compounded daily (excluding leap years). Bank B offers a loan that charges 3.2131% interest compounded quarterly. Determine the APY for each to decide which is offering a better loan. Round your answers to 4 decimal places. Enter your answers with 4 decimal places (using zeros if needed) and don't forget to include a percent sign, %, in your answers. APY for Bank A=
Transcript text: Two banks are offering different loan opportunities. Bank A offers a loan that charges $3.1965 \%$ interest compounded daily (excluding leap years). Bank B offers a loan that charges $3.2131 \%$ interest compounded quarterly. Determine the APY for each to decide which is offering a better loan. Round your answers to 4 decimal places. Enter your answers with 4 decimal places (using zeros if needed) and don't forget to include a percent sign, \%, in your answers. APY for Bank A= $\square$
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Solution

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Solution Steps

Step 1: Calculate the APY for each bank

Using the formula: $APY = (1 + \frac{r}{n})^n - 1$, where $r$ is the annual interest rate (as a decimal) and $n$ is the number of compounding periods per year. For Bank 1: $APY_1 = (1 + \frac{0.032}{365})^{365} - 1 = 0.0325$ For Bank 2: $APY_2 = (1 + \frac{0.0321}{4})^{4} - 1 = 0.0325$

Step 2: Compare the APYs to determine which bank is offering a better rate

For loans, a lower APY is preferable.

Final Answer:

Based on the calculated APYs, Bank 1 is offering a better rate for loans.

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