Question

Bank A and Bank B advertise differing interest rates: Bank A pays a nominal rate of...

Bank A and Bank B advertise differing interest rates:

Bank A pays a nominal rate of 5%/year CQ Bank B pays depositors 4.75%/year CD (i.e. daily)

What bank has a better rate?

Engineering   Civil-Engineering   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

We will calculate compounded amount for both Bank's to find better interest rate

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. If a bank advertises a savings account that pays a 6% nominal interest rate compounded...
1. If a bank advertises a savings account that pays a 6% nominal interest rate compounded continuously, what is the effective annual percentage rate? 2. Bank A offers a nominal annual interest rate of 5% compounded daily, while Bank B offers continuous compounding at a 4.6% nominal annual rate. If you deposit $3,000 with each bank, what will be the difference in the two bank account balances after two years? (Show ALL work and formulas used!)
The BCS National Bank pays 4% nominal interest on special three-year certificates. What is the effective...
The BCS National Bank pays 4% nominal interest on special three-year certificates. What is the effective annual rate if the interest is compounded a. every three months? b. daily? c. continuously
11. EFFECTIVE VERSUS NOMINAL INTEREST RATES Bank A pays 6.5% interest compounded annually on deposits, while...
11. EFFECTIVE VERSUS NOMINAL INTEREST RATES Bank A pays 6.5% interest compounded annually on deposits, while Bank B pays 6% compounded daily. a. Based on the EAR (or EFF%), which bank should you use? (Select From I-V) You would choose Bank A because its EAR is higher. You would choose Bank B because its EAR is higher. You would choose Bank A because its nominal interest rate is higher. You would choose Bank B because its nominal interest rate is...
Bank A offers a nominal annual interest rate of 4% compounded daily, while Bank B offers...
Bank A offers a nominal annual interest rate of 4% compounded daily, while Bank B offers continuous compounding at a 3.4% nominal annual rate. If you deposit $5,000 with each bank, what will be the difference in the two bank account balances after 3 years?
Exercise IV (effective and nominal interest rate) a. The effective interest rate is 21.44%. If there...
Exercise IV (effective and nominal interest rate) a. The effective interest rate is 21.44%. If there are 12 compounding periods per year, what is the nominal interest rate? b. What is the effective interest rate on a continuously compounded loan that has a nominal interest rate of 25%? c. Which is the better investment, a fund that pays 20% compounded annually, or one that pays 18.5 % compounded continuously? d. Money invested at 6% per year, compounded monthly. How money...
Bank A pays 4 percent interest, compounded annually, on deposits, while Bank B pays 3.9 percent,...
Bank A pays 4 percent interest, compounded annually, on deposits, while Bank B pays 3.9 percent, compounded daily. What is the effective rate offered by Bank A? By Bank B? Which bank should you use?
First Bank of Midesto Medeque pays a 8.14% nominal rate of interest compounded weekly. What is...
First Bank of Midesto Medeque pays a 8.14% nominal rate of interest compounded weekly. What is the effective rate of interest? Enter your answer as a percentage without the % sign (e.g., enter 1.25% as 1.25). (use formula Step-by-Step NOT excel)
Which of the following statements is correct, assuming positive interest rates and holding other things constant?...
Which of the following statements is correct, assuming positive interest rates and holding other things constant? Banks A and B offer the same nominal annual rate of interest, but A pays interest quarterly and B pays monthly. A deposit in Bank B will have a higher value in five years. Banks A and B offer the same nominal annual rate of interest, but A pays interest daily and B pays semiannually. A deposit in Bank B will have a higher...
Your bank account pays a 12 percent nominal rate of interest. The interest is compounded quarterly....
Your bank account pays a 12 percent nominal rate of interest. The interest is compounded quarterly. Which of the following statements is most correct? A. The periodic rate of interest is 4 percent and the effective rate of interest is greater than 12 percent. B. The periodic rate of interest is 3 percent and the effective rate of interest is 12 percent. C. The periodic rate of interest is 3 percent and the effective rate of interest is greater than...
David decided to invest an amount of money in a bank that pays 20.00% nominal interest,...
David decided to invest an amount of money in a bank that pays 20.00% nominal interest, compounded monthly, to provide him with an annuity of $10,800 (per year) for 6 years, starting 12 years from now. If the interest rate remains constant over this entire period. What amount should he invest?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT