Question

A three-year bank CD paying 7.23 percent compounded quarterly. Calculate effective annual interest rate (EAR)? (Round answer to 2 decimal places, e.g. 15.25%.) Effective annual rate % eTextbook and Media A three-year bank CD paying 7.03 percent compounded monthly. Calculate effective annual interest rate (EAR)? (Round answer to 2 decimal places, e.g. 15.25%.) Effective annual rate % eTextbook and Media A three-year bank CD paying 7.53 percent compounded annually. Calculate effective annual interest rate (EAR)? (Round answer to 2 decimal places, e.g. 15.25%.) Effective annual rate % eTextbook and Media Which of the above investments has the highest effective annual interest rate (EAR)?

Answer 1

Follows are the solution to the question:

Step-by-step explanation:

m = 4,

EAR =
`(1 + (0.08)/(4)) * 4-1`

`= 1 + 0.02 * 4-1\\\\= 1 + 0.08 -1\\\\= 0.08\\\\`

The successful quarter cumulative rate of interest = 8.24 \%

In Method 2 use Tool in Texas:

By Using the (ICONV) worksheet:

1)

To pick the worksheet, click ICONV 2.

2)

Its previous meaning will represent the NOM.

3)

To clear the worksheet, click [CLR WORK] 2nd

Continue as below.

Displayed keystrokes:

NOM = previous value 2nd ICONV:

NOM = 0.00 2nd CLRWORK:

8 DAYS: Name = 8.00.

EFF: DownArrow = 0.00

DownArrow: C / Y = meaning previous

4)

DOS: C / Y = 5.00 p.m.

EFF: DownArrow = 0.00

CPT: FRP = 8.24