What is the interest rate for Bobby-Sue's mortgage?

To determine the appropriate interest rate for Bobby-Sue's mortgage, it's essential to consider the types of compounding methods as well as the specific rates provided.

The correct answer of 6.95% compounded semi-annually reflects a common rate structure in the mortgage market, especially for fixed-rate mortgages. This type of interest rate indicates that interest will be calculated and added to the principal amount of the mortgage twice a year. Compounding semi-annually can be advantageous to borrowers as it increases the effective interest rate, thereby reflecting the true cost of borrowing over time.

When evaluating various mortgage options, borrowers should be aware that the choice of compounding frequency can impact the total amount of interest paid over the life of the loan. Semi-annual compounding tends to be standard in many markets, making a rate of 6.95% not only competitive but also practical.

Understanding how different compounding methods affect the overall cost can help in making informed decisions about mortgage options. This context establishes why the selected option stands out compared to the others.