Question
A bank offers the following choices for certificates of deposit: Year one: 4% nominal interest rate convertible quarterly Year three:5% nominal interest rate convertible quarterly
A bank offers the following choices for certificates of deposit:
Year one: 4% nominal interest rate convertible quarterly
Year three:5% nominal interest rate convertible quarterly
Year 5: 5.65% nominal interest rate convertible quarterly
Ther certificates mature at the end of the term. the bank does not permit early withdrawals. during the next 6 years the bank will coninue to offer certificates of deposit with the same terms and interest rates. an investor initially deposits 10,000 in the bank and withdraws both principal and interest at the end of 6 years. calculate the max annual effective rate of interest the investor can earn over the 6 year period.
A. 5.09%, B. 5.22%, C. 5.35%, D. 5.48%, E. 5.61%
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