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A bank offers you $1050 in one year from now, if you deposit $1000 today. A competitor of this bank quotes APRs on their savings
A bank offers you $1050 in one year from now, if you deposit $1000 today. A competitor of this bank quotes APRs on their savings accounts. Assume that the second bank compounds interest semi-annually. What APR does the second bank have to offer so that you are indifferent between the two offers? In other words, what APR does the second bank have to offer so that the two banks have the same EAR?
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