A bank offers an account with an APR of 5.8% and an EAR of 5.88%. How does the bank compound interest for this account? A) weekly compounding B) monthly compounding C) semiannual compounding D) annual compounding
A bank offers an account with an APR of 5.8% and an EAR of 5.88%. How does the bank compound interest for this account? A) weekly compounding B) monthly compounding C) semiannual compounding D) annual compounding
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
3. A bank offers an account with an APR of 5.8% and an EAR of 5.88%. How does the bank
interest
A) weekly compounding
B) monthly compounding
C) semiannual compounding
D) annual compounding
Expert Solution
Step 1
APR is the annual percentage rate. It refers to the quoted rate or the nominal rate.
EAR is the effective annual rate. This is the rate which takes into consideration the frequency of compounding.
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