(Related to Checkpoint5.7) (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

3.95 percent APR compounded semiannually

semiannually, while the second certificate ofdeposit, CD#2, pays 4.00

4.00 percent APR compounded monthly

monthly. 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 3.95

3.95 percent APR compounded semiannually

semiannually, the EAR for the deposit is

nothing

%. (Round to two decimalplaces.)