Question

Which bank has the best effective annual yield?

A) Badger Bank with a nominal rate of 6.4% compounded
monthly.

B) Wolverine Bank with a nominal rate of 6.34% compounded
weekly.

C) Catamount Bank with a nominal rate of 6.55% compounded
yearly.

Answer #1

Bank D pays 7.289% effective annual yield, on an investment
account in which interest is compounded weekly. What is the annual
interest rate before compounding? Enter your answer as a percent,
rounded to the nearest four decimals, without the % sign. (9.34562%
should be input as 9.3456.)

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.
• Bank D offers a nominal annual interest rate of 3.98%
compounded continuously.
(a) According to this ir rmation, where would you prefer to
open a savings account? Justify your answer. [4 marks]
(b) If...

What is the effective monthly interest rate for a loan with a 8%
nominal annual interest rate if the loan is compounded
(a) monthly, (b) daily, or
(c) continuously?
A friend offers you a loan at an effective daily interest rate
of 0.2%. (a) What is the nominal (also known as
the APR or Annual Percentage Rate) rate for this loan?
(b) What is the effective annual interest rate for
his loan?
Show all work please

Edmonton Bank offers to lend you $10,000 at a nominal rate of
6.4%, compounded monthly. The loan (principal plus interest) must
be repaid at the end of the year. Calgary Bank also offers to lend
you the $10,000, but it will charge an annual rate of 6.4%, with no
interest due until the end of the year. What is the difference in
the effective annual rates charged by the two banks? 0.00% 0.59%
0.40% 0.19%

One bank advertises a nominal rate of 5.81% compounded
semiannually. A second bank advertises a nominal rate of 5.72%
compounded weekly. What are the effective yields? (Round your
answers to two decimal places.)
first bank
%
second bank
%
In which bank would you deposit your money?
first banksecond bank

Which of the following best describes the annual percentage
rate?
A.
the effective annual rate, after compounding is taken into
account
B.
the quoted interest rate which, considered with the
compounding period, gives the effective interest rate
C.
the discount rate, when compounded more than once a year or
less than once a year
D.
the discount rate, when effective annual rate is divided by the
number of times it is compounded in a year

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...

Calculate the Nominal Interest Rate, the Interest Rate per
Compounding Period and the Effective Annual Interest Rate for the
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
8.5619% compounded quarterly.
3. Nomani wants to earn 0.25% per week.

Which of the following one-year, $1000 bank loans offers the
lowest effective annual rate?
a. A loan with an APR of 6%, compounded monthly
b. A loan with an APR of 6%, compounded annually, with a
compensating balance requirement of 10% (on which no interest is
paid)
c. A loan with an APR of 6%, compounded annually, with a 1% loan
origination fee

Which one of the following has the highest effective annual
rate?
Question 9 options:
1)
6 percent compounded annually
2)
6 percent compounded quarterly
3)
6 percent compounded semiannually
4)
6 percent compounded monthly
5)
6 percent compounded weekly

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