(Q8 IN TYPE B) IN JUNE 2007, THE POSTED MORTGAGE RATE AT CIBC WAS 6...

3. (Q8 in Type B) In June 2007, the posted mortgage rate at CIBC was 6% for a 6-year term. What is the monthly interest rate? Use 6 decimal places in your calculations. (Remember that mortgages are compounded semi-annually) A) 0.4939% B) 0.5000% C) 0.5061% D) 6.0900% Solution A. The 6% posted rate is an APR from 3% per 6 months. The EAR is 1.03

²

– 1 = 0.0609. The monthly rate is (1.0609)

^1/12

– 1 = 0.004939.