Suppose that Bank A pays 1.89% interest compounded quarterly on a 5-year CD, while Bank B pays 1.88% compounded daily. a. What are the effective rates for the two CDs? Use a 365-day year. b. Suppose $4000 was invested in each of these accounts. Find the compound amount after five years for each account. a. The effective rate for Bank A is %. (Do not round until the final answer. Then round to three decimal places as needed.)
Suppose that Bank A pays 1.89% interest compounded quarterly on a 5-year CD, while Bank B pays 1.88% compounded daily. a. What are the effective rates for the two CDs? Use a 365-day year. b. Suppose $4000 was invested in each of these accounts. Find the compound amount after five years for each account. a. The effective rate for Bank A is %. (Do not round until the final answer. Then round to three decimal places as needed.)
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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![Suppose that Bank A pays 1.89% interest compounded quarterly on a 5-year CD, while Bank B pays 1.88%
compounded daily.
a. What are the effective rates for the two CDs? Use a 365-day year.
b. Suppose $4000 was invested in each of these accounts. Find the compound amount after five years for each
account.
a. The effective rate for Bank A is%.
(Do not round until the final answer. Then round to three decimal places as needed.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F095ea013-5eb7-4aaf-a23a-6e29389c2c79%2F0d34821f-d7c1-47b5-9c52-e6dd04c0df8a%2F1t8g5vk_processed.png&w=3840&q=75)
Transcribed Image Text:Suppose that Bank A pays 1.89% interest compounded quarterly on a 5-year CD, while Bank B pays 1.88%
compounded daily.
a. What are the effective rates for the two CDs? Use a 365-day year.
b. Suppose $4000 was invested in each of these accounts. Find the compound amount after five years for each
account.
a. The effective rate for Bank A is%.
(Do not round until the final answer. Then round to three decimal places as needed.)
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