Bank 1 qoutes an annual rate of 11.2 % with monthlly compounding. Bank 2 uses semiannual compounding and quotes an annual rate of 11.4 % |
Requirement 1: |
Calculate the effective annual interest rate for each bank. (Enter your answers as a percent rounded to 2 decimal places (e.g., 32.16).) |
EAR | |
Bank 1 | % |
Bank 2 | % |
Thank you!!
EAR=(1+APR/m)^m-1
where m=compounding periods
Bank 1:
EAR=(1+0.112/12)^12-1
=11.79%(Approx).
Bank 2:
EAR=(1+0.114/2)^2-1
=11.72%(Approx).
Bank 1 qoutes an annual rate of 11.2 % with monthlly compounding. Bank 2 uses semiannual...
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