Question

1. Your bank is offering you an account that will pay 22% interest​ (an effective​ two-year...

1. Your bank is offering you an account that will pay 22% interest​ (an effective​ two-year rate) in total for a​ two-year deposit. Determine the equivalent discount rate for the following​ periods:

a. Six months

b. One year

c. One month

​(Note: Be careful not to round any intermediate steps less than six decimal​ places.)

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Answer #1

ANSWER:

The equivalent discount rate is computed as shown below:

a. ( 1 + 0.22 )1/4 -1

= 5.096913 % Approximately

b. ( 1 + 0.22 )1/2 - 1

= 10.453610 % Approximately

c. ( 1 + 0.22 )1/24 - 1

= 0.831987% Approximately

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