EAR of CD#1 = (1+APR/n)^n - 1
n is the no of compounding i.e. 2
= (1+0.0545/2)^2 - 1
= 5.52%
EAR of CD#1 = (1+APR/n)^n - 1
n is the no of compounding i.e. 4
= (1+0.0550/4)^4 - 1
= 5.61%
CD#2 is recommanded to the grandmother as the EAR of CD#2 is higher than the CD#1 .
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(Related to Checkpoint 5.7) (Calculating an EAR) Your grandmother asks for your help in choosing a...
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