RJ has two loans. Loan H has a nominal rate of 5.68%, compounded daily. Loan I has a nominal rate of 6.33%, compounded monthly. Which loan's effective rate had the greater increase, relative to its nominal rate, and how much greater is its increase than that of the other loan?

Use the effective annual rate formula: (1 + nominal rate ÷ compounding periods)^(compounding periods) − 1. Loan H’s effective rate is about 5.842%, an increase of about 0.162 percentage points over 5.68%. Loan I’s effective rate is about 6.514%, an increase of about 0.184 percentage points over 6.33%. Loan I’s increase is therefore about 0.022 percentage points greater, which rounds to 0.03 percentage points.

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