Question
(Calculating anEAR) Your grandmother asks for your help in choosing a certificate of deposit(CD) from a bank with aone-year maturity and a fixed interest rate.
(Calculating anEAR)Your grandmother asks for your help in choosing a certificate of deposit(CD) from a bank with aone-year maturity and a fixed interest rate. The first certificate ofdeposit, CD#1, pays 2.95 percent APR compounded semiannually, while the second certificate ofdeposit, CD#2, pays 3.00 percent APR compounded quarterly. What is the effective annual rate(the EAR) of eachCD, and which CD do you recommend to yourgrandmother?
If the first certificate ofdeposit, CD#1, pays 2.95 percent APR compounded semiannually, the EAR for the deposit is
2.97
2.97%. (Round to two decimalplaces.)
If the second certificate ofdeposit, CD#2, pays 3.00 percent APR compounded quarterly, the EAR for the deposit is
nothing
%. (Round to two decimalplaces.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started