1. A bank offers savings accounts with high interest rates to its customers. a. If the bank advertises it pays 4% annual interest (APR) on savings accounts, with the interest compounded daily, what is the effective annual interest rate? b. If you put $2,000 in the savings account, and it has grown to $2,150 at the end of six months, what was the APR and APY? Assume monthly compounding.

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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1. A bank offers savings accounts with high interest rates to its customers.
a.
If the bank advertises it pays 4% annual interest (APR) on savings accounts, with the
interest compounded daily, what is the effective annual interest rate?
b.
If you put $2,000 in the savings account, and it has grown to $2,150 at the end of six
months, what was the APR and APY? Assume monthly compounding.
Transcribed Image Text:1. A bank offers savings accounts with high interest rates to its customers. a. If the bank advertises it pays 4% annual interest (APR) on savings accounts, with the interest compounded daily, what is the effective annual interest rate? b. If you put $2,000 in the savings account, and it has grown to $2,150 at the end of six months, what was the APR and APY? Assume monthly compounding.
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