Kellie has $9,000 to invest. A local bank offers a 30-month CD with an APR of 3.8% compounded monthly. What is the APY? (Round your answer to three decimal places.) % Mariah has $12,000 to invest. A local bank offers a 24-month CD with an APR of 3.8% compounded monthly. What is the APY? (Round your answer to three decimal places.) % Compare the APY results. Which of the following statements is true? Kellie's CD has a higher APY because her money is invested for a longer period of time than Mariah's. Mariah's CD has a higher APY because the amount of money she is investing is greater than Kellie's. Their CDs have the same APY because they have the same number of compoundings per year and the same APR. The amount invested and the time period of the investment don't matter because they aren't part of the APY formula.

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
icon
Related questions
Question

am. 121.

Kellie has $9,000 to invest. A local bank offers a 30-month CD with an APR of 3.8% compounded monthly. What is the APY? (Round your answer to three decimal places.)
%
Mariah has $12,000 to invest. A local bank offers a 24-month CD with an APR of 3.8% compounded monthly. What is the APY? (Round your answer to three decimal places.)
%
Compare the APY results. Which of the following statements is true?
Kellie's CD has a higher APY because her money is invested for a longer period of time than Mariah's.
Mariah's CD has a higher APY because the amount of money she is investing is greater than Kellie's.
Their CDs have the same APY because they have the same number of compoundings per year and the same APR. The amount invested and the time period of the investment don't matter because
they aren't part of the APY formula.
Transcribed Image Text:Kellie has $9,000 to invest. A local bank offers a 30-month CD with an APR of 3.8% compounded monthly. What is the APY? (Round your answer to three decimal places.) % Mariah has $12,000 to invest. A local bank offers a 24-month CD with an APR of 3.8% compounded monthly. What is the APY? (Round your answer to three decimal places.) % Compare the APY results. Which of the following statements is true? Kellie's CD has a higher APY because her money is invested for a longer period of time than Mariah's. Mariah's CD has a higher APY because the amount of money she is investing is greater than Kellie's. Their CDs have the same APY because they have the same number of compoundings per year and the same APR. The amount invested and the time period of the investment don't matter because they aren't part of the APY formula.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 2 images

Blurred answer
Knowledge Booster
Types Of Securities Firms
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education