Question

You want to invest $11,000 and are looking for safe investment options. Your bank is offering you a certificate of deposit that pays a nominal rate of 14% that is compounded bimonthly (every two months). What is the effective rate of return that you will earn from this investment

Answer 1

the effective rate of return that earned is 14.843%

Step-by-step explanation:

The computation of the effective rate of return is shown below:

The effective rate of return earned is

= (1 + (nominal rate ÷ number of compounding period)^number of compounding period - 1

= (1 + (14% ÷ 6))^6 - 1

= 14.843%

Hence, the effective rate of return that earned is 14.843%

We simply applied the above formula so that the correct value could come

And, the same is to be considered