Question
Which do you prefer : a bank account that pays 4.5% per year (EAR) for three years or a) An account that pays 2.5% every
Which do you prefer : a bank account that pays 4.5% per year (EAR) for three years or
a) An account that pays 2.5% every 6 months for three years?
b) An account that pays 6.5% every 18 months for three years?
c) An account that pays that pays 0.42% per month for three years?
(Note: compare your current bank EAR with each of the three alternative accounts. Be careful not to round any intermediate steps less than six decimal places)
.If you deposit $1 into a bank account that pays 4.5% per year for 3 years:
The amount you will receive after three years is $__ (Round to five decimal places)
a) An account that pays 2.5% every six months for 3 years?
If you deposit $1 into a bank account that pays 2.5% every 6 months for 3 years:
The amount you will receive after three years is $__ (Round to five decimal places)
Which bank account would you prefer?
b) An account that pays 6.5% every 18 months for 3 years?
If you deposit $1 into a bank account that pays 6.5% every 18 months for 3 years:
The amount you will receive after three years is $__ (Round to five decimal places)
Which bank account would you prefer?
c) An account that pays 0.42% per month for 3 years?
If you deposit $1 into a bank account that pays 0.42% per month for 3 years:
The amount you will receive after three years is $__ (Round to five decimal places)
Which bank account would you prefer?
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