F1, F2 and F3 are three financial services companies that charge different interest rates on their loans. F1 charges 10% compounded daily, F2 charges 10.1% compounded quarterly, and F3 charges 10.2% compounded semi-annually.
a) What is the effective annual interest rate charged by each of the three companies? (Hint: An accuracy of at least 2 decimal digits is required).
b) Calculate the annual payment a borrower would have to pay to each company on a loan of $400,000 over 7-year period?
c) Which financing company would you prefer?