Question

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?
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Given,

Bank A:

Interest rate = 4% compounded annually

Bank B:

Interest rate = 3.9% compounded daily

Solution :-

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
eBook Bank A pays 10% interest compounded annually on deposits, while Bank B pays 9.5% compounded...
eBook Bank A pays 10% interest compounded annually on deposits, while Bank B pays 9.5% compounded daily. a. Based on the EAR (or EFF%), which bank should you use? 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 higher. You are indifferent between the banks and...
Bank A pays 6% interest compounded annually on deposits, while Bank B pays 5.75% compounded daily....
Bank A pays 6% interest compounded annually on deposits, while Bank B pays 5.75% compounded daily. a. Based on the EAR (or EFF%), which bank should you use? I. You would choose Bank A because its EAR is higher. II. You would choose Bank B because its EAR is higher. III].You would choose Bank A because its nominal interest rate is higher. IV. You would choose Bank B because its nominal interest rate is higher. V. You are indifferent between...
Bank-Keys offers 3.45% interest compounded daily on deposits, while Bank-Hunted offers 3.50% interest compounded semi-annually. Which...
Bank-Keys offers 3.45% interest compounded daily on deposits, while Bank-Hunted offers 3.50% interest compounded semi-annually. Which bank would you invest your money? Why? Note: To answer this question you can not invest any dollar and then see the amount you will have. Question doesn’t provide how much money you will invest?
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...
Question A man deposits $ 29,700 into a bank, which pays 4% interest that is compounded...
Question A man deposits $ 29,700 into a bank, which pays 4% interest that is compounded semiannually. What will he have in his account at the end of three years? The owner of a small factory thinks that he will need $ 71,800 for new equipment in 10 years. He decides that he will put aside the money now so that after 10 years the $ 71,800 will be available. His bank offers him 8% interest compounded semiannually. What is...
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...
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?
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!)
Bank A offers a 2-year certificate of deposit (CD) that pays 10 percent compounded annually. Bank...
Bank A offers a 2-year certificate of deposit (CD) that pays 10 percent compounded annually. Bank B offers a 2-year CD that is compounded semi-annually. The CDs have identical risk. What is the stated, or nominal, rate that Bank B would have to offer to make you indifferent between the two investments? show work on excel*
An individual deposits an annual bonus into a savings account that pays 4​% interest compounded annually....
An individual deposits an annual bonus into a savings account that pays 4​% interest compounded annually. The size of the bonus increases by ​$4,200 each​ year, and the initial bonus amount was ​$18,000. Determine how much will be in the account immediately after the sixth deposit.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT