The First National Bank is offering a4year certificate of deposit (CD) at 4% interest compounded quarterly; Second National Bank is offering a4year CD at 5% interest compounded annually. (Round your answers to two decimal places.)

(a) If you were interested in investing $7,000in one of these CDs, calculate the compound amount (in $) of each offer. (UseTable 11-1.)

First National Bank$

Second National Bank

(b)What is the annual percentage yield of each CD?

First National Bank%

Second National Bank%

(c) If Third National Bank has a4year CD at 4.5% interest compounded monthly, use the compound interest formula to calculate the compound amount (in $) of this offer.

As an incentive to attract savings deposits, most financial institutions today offerdailyand evencontinuous compounding. This means that savings, or passbook, accounts, as well as certificates of deposit (CDs), earn interest compounded each day or even more frequently, such as every hour or even every minute. (Continuous compounding, in which compounding occurs every instant, involves a different formula that is derived from the formula we've been using.) Let's take a look at daily compounding.

To calculate the compound amount,A, of an investment with daily compounding, use the compound interest formula modified as follows:

• Rate per period (daily) =i
• 365
• (nominal interest rate,i, divided by 365)
• Number of periods (days),n, = number of days of the investment.

A=P1 +i/365

n

Calculator Sequence:( 1 + (i365 ) )y^xnP=A.

(Round your answers to the nearest cent.)

(a) On April18, Thomas Ash deposited $2,600in a passbook savings account at 3.5% interest compounded daily. What is the compound amount (in $) of his account on August 5?

(b) Using daily compounding, calculate the compound amount (in $) of a $9,000investment for each of the three CDs.

• The First National Bank is offering a 5 year CD at3% interest.
• The Second National Bank is offering a 5 year CD at4% interest.
• The Third National Bank has a 5 year CD at5.5% interest.

First National Bank$

Second National Bank$

Third National Bank$