Please show your work and write solutions in details, including formulas and how you plug numbers, given in each question, into these formulas. Please write short verbal conclusion at the end summarizing your answer in words.
a) What effective annual rate results from daily compounding of 8%?
b) Suppose that you have a mortgage on your house. You make monthly payments. Your bank quotes APR equal 8.5% per year. What is your effective annual rate?