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 3.95 percent APR compounded semiannually, while the second certificate ofdeposit, CD#2, pays 4.00 percent APR compounded monthly. What is the effective annual rate(the EAR) of eachCD, and which CD do you recommend to yourgrandmother?
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John E Freunds Mathematical Statistics With Applications
Authors: Irwin Miller, Marylees Miller
8th Edition
978-0321807090, 032180709X, 978-0134995373
