A bank advertises it pays 4% annual interest, com pounded daily, on savings accounts, provided the money is left in the account for 5 years. What is the effective annual interest rate?
The effective annual interest rate=
where i= stated annual interest rate=4%=0.04
n=number of compounding periods=365
The effective annual interest rate={(1+(0.04/365))^365}-1=4.08%
So the effective annual interest rate is 4.08%
A bank advertises it pays 4% annual interest, com pounded daily, on savings accounts, provided the...
3.26 Georgi Rostov deposits $4,000 in a savings account that pays 8% interest com- pounded monthly. Three years later, he deposits $5,000. Two years after the $5,000 deposit, he makes another deposit in the amount of $7000. Four years after the $7,000 deposit, half of the accumulated money is transferred to a fund that pays 9% interest compounded quarterly. How much money will be in each account six years after the transfer?
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A certain savings and loan company advertises that is pays 6% nominal interest, compounded quarterly. What is the effective interest rate per annum? If you deposit $6000 now and plan to withdraw it in five years, how much would the account be worth at that time? (Hint: to find the effective interest rate, use the formula: (1 + r/M)M-1.)
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