Question

PLEASE OUTLINE THE HOW TO PLUG INTO FINANCE CALCULATOR (New to using a Finance Calculator)

1) A bank offers 4.00% on savings accounts. What is the effective annual rate if interest is compounded (A) semi-annually, (B) quarterly, (C) monthly, (D) daily, & (E) continuously?

2) Assume a bank offers an effective annual rate of 5.56%. (A) If compounding is quarterly what is the APR? (B) If it is compounding monthly what is the APR?

Answer 1

1-	effective annual interest rate if compounding is done semiannualy	(1+r/n)^n-1	(1+4%/2)^2-1	4.04%
	effective annual interest rate if compounding is done quarterly	(1+r/n)^n-1	(1+4%/4)^4-1	4.06%
	effective annual interest rate if compounding is done monthly	(1+r/n)^n-1	(1+4%/12)^12-1	4.07%
	effective annual interest rate if compounding is done daily	(1+r/n)^n-1	(1+4%/365)^365-1	4.08%
	effective annual interest rate if compounding is done continuously	r = e^i - 1	2.718^4%-1	4.08%
2-	effective annual interest rate if compounding is done quarterly	(1+r/n)^n-1	(1+5.56%/4)^4-1	5.68%
	effective annual interest rate if compounding is done monthly	(1+r/n)^n-1	(1+5.56%/12)^12-1	5.70%