1. A bank offers savings accounts with high interest rates to its customers. a. If the bank advertises it pays 3.90% annual interest (APR) on savings accounts, with the interest compounded daily, what is the effective annual interest rate? b. If you put $5,000 in the savings account, and it has grown to $5,400 at the end of six months, what was the APR and APY? Assume monthly compounding.
1. A bank offers savings accounts with high interest rates to its customers. a. If the bank advertises it pays 3.90% annual interest (APR) on savings accounts, with the interest compounded daily, what is the effective annual interest rate? b. If you put $5,000 in the savings account, and it has grown to $5,400 at the end of six months, what was the APR and APY? Assume monthly compounding.
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter19: The Basic Tools Of Finance
Section: Chapter Questions
Problem 1CQQ
Question
Engineering Econ HW3 Q1
Transcribed Image Text:1. A bank offers savings accounts with high interest rates to
its customers.
a. If the bank advertises it pays 3.90% annual interest
(APR) on savings accounts, with the interest
compounded daily, what is the effective annual
interest rate?
b. If you put $5,000 in the savings account, and it has
grown to $5,400 at the end of six months, what was
the APR and APY? Assume monthly compounding.
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