Explanation Given: Time period is 5 year .Extremely Trustworthy Saving offer CDs at 7.63 % compounded annually Bank of the South offer CDs at 7.59 % compounded daily. Formula used: Write the formula for annual yield P(1+rt) = P(1+i) n Here P is the principal amount, r is the simple rate of interest, i is the periodic interest and n is the compounding period. Calculation: Consider the formula of annual yield, P(1+rt) = P(1+i) n Cancel P from both sides, ( 1+rt ) = (1+i) n 1 + rt = ( 1 + i) n rt = ( 1 + i) n − 1 r = ( 1 + i) n − 1 t To determining the annual yield for Extremely Trustworthy Saving by substitute 5 for t , 7.63 % for i and 5 for n in the above equation. r = ( 1 + 7.63 % ) 5 − 1 5 = ( 1 + 7.63 % ( 10 − 2 1 % ) ) 5 − 1 5 = ( 1 + 0

8th Edition

ISBN: 9781305104174

Author: David B. Johnson, Thomas A. Mowry

Publisher: Cengage Learning

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The annual yield for each institution and determine the more advantageous institution for consumer.

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The annual yield for each institution and determine the more advantageous institution for consumer.

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To compute: The annual yield for each institution and determine the more advantageous institution for consumer.

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To compute:

The annual yield for each institution and determine the more advantageous institution for consumer.