What interest rate and compounding frequency is associated with Gail's first mortgage?

In mortgage financing, the interest rate and compounding frequency are crucial elements that determine the overall cost of borrowing. The correct choice indicates that Gail's first mortgage carries an interest rate of 3.95% with compounding on a semi-annual basis.

An interest rate of 3.95%, particularly in the context of mortgages, suggests it is a relatively moderate rate, especially as consumers often look for favorable lending terms. Compounding semi-annually means that the interest is calculated and added to the principal balance twice a year. This is significant because the frequency of compounding affects how quickly the balance grows: semi-annual compounding can lead to less total interest paid over time compared to more frequent compounding like monthly or quarterly, which can accumulate interest more rapidly.

Understanding the nuances of compounding frequencies is vital for both lenders and borrowers, as it impacts the total amount repaid over the life of the mortgage. Thus, the information presented in the correct choice conveys both a typical interest rate seen in the market and a compounding method that aligns with conventional practices, making it a reasonable answer in the context of typical mortgage agreements.