Question

The following four banks give their the APY (annual percentage yield) quote on saving: Bank A: 5% APY, annually compounding Bank B: 5% APY, quarterly compounded Bank C: 4.8% APY, monthly compounding Bank D: 4.85% APY, Daily compounding The EAR of the bank that offers the best deal on saving is %?

Answer #1

Bank A

EAR = [(1 +stated rate/no. of compounding periods) ^no. of compounding periods - 1]* 100 |

Effective Annual Rate = ((1+5/1*100)^1-1)*100 |

Effective Annual Rate% = 5 |

Bank B

EAR = [(1 +stated rate/no. of compounding periods) ^no. of compounding periods - 1]* 100 |

Effective Annual Rate = ((1+5/4*100)^4-1)*100 |

Effective Annual Rate% = 5.09 |

Bank C

EAR = [(1 +stated rate/no. of compounding periods) ^no. of compounding periods - 1]* 100 |

Effective Annual Rate = ((1+4.8/12*100)^12-1)*100 |

Effective Annual Rate% = 4.91 |

Bank D

EAR = [(1 +stated rate/no. of compounding periods) ^no. of compounding periods - 1]* 100 |

Effective Annual Rate = ((1+4.85/365*100)^365-1)*100 |

Effective Annual Rate% = 4.97 |

Bank B has highest EAR and gives the best deal

What is the annual percentage yield (APY) for money invested at
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monthly? The APY is nothing%. (Type an integer or decimal rounded
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There are four banks: A, B, C and D:
• Bank A offers an effective annual rate of 4.02%.
• Bank B offers a nominal annual interest rate of 4 %
compounded semiannually.
• Bank Coffers a nominal annual discount rate of 3.96%
compounded monthly.
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compounded continuously.
(a) According to this ir rmation, where would you prefer to
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Red Bank: 2.95% per year compounded monthly
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Calculate the Nominal Interest Rate, the Interest Rate per
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following problems:
1. A Bank is offering a saving account at 3% compounded
monthly.
2. A Credit Card company says their card charges an APY of
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the maximum rate which a bank can earn given a stated annual
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compounding; e)monthly compounding

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and an annual percentage rate of 10 percent?
A.
Semi-annual.
B.
Annual.
C.
Daily.
D.
Monthly.
E.
Continuous.

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