Question

Lili is planning to invest in a bank account. Bank A offers 4.40% rate of Interest, compounded quarterly. Bank B offers 4.30% rate of interest, compounded monthly. Bank Coffers 3.70% rate of interest, compounded continuously. Lin, being a Finance major, wisely compares the effective annual rates (EARS) of the three offers and chooses the bank that yields the highest EAR of for her investment. 4.3% 45% 47%
financial calculator steps please

Answer 1

EAR of bank A is computed as shown below:

First Press 2nd and then press ICONV (This is on the number 2 )

Now it will ask for Nom, which is 4.40. Plug this number and press enter and then press down arrow key two times

Now it is asking for C/Y, which is the number of times of compounding period, which is 4. Plug 4 and press enter.

Now finally press up arrow key, it will show EFF, to reflect the final EFF, please press CPT

It will give effective rate of interest equal to 4.5% Approximately

EAR of bank B is computed as shown below:

First Press 2nd and then press ICONV (This is on the number 2 )

Now it will ask for Nom, which is 4.30. Plug this number and press enter and then press down arrow key two times

Now it is asking for C/Y, which is the number of times of compounding period, which is 12. Plug 12 and press enter.

Now finally press up arrow key, it will show EFF, to reflect the final EFF, please press CPT

It will give effective rate of interest equal to 4.4% Approximately

EAR of bank C is computed as shown below:

Please write 0.037 and then press 2nd and then LN

Subtract 1 from it.

It will give effective rate equal to 3.8% Approximately

So the correct answer is option of 4.5% which is given by Bank A

Feel free to ask in case of any query relating to this question