Joel takes out a loan with a stated rate of 11.85% interest. If the interest is calculated weekly, how much greater is Joel’s effective rate than his stated rate?

With weekly compounding, the effective annual rate is (1 + 0.1185/52)^52 − 1, which is about 12.57%. Subtract the stated rate: 12.57% − 11.85% ≈ 0.72 percentage points. So the difference is 0.72 percentage points, choice a.

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