A bank is offering to sell 6-month certificates of deposit for $12,000. At the end of 6 months, the bank will pay $13,000 to the certificate owner. Compute the nominal annual interest rate and the effective annual interest rate.

A bank is offering to sell 6-month certificates of deposit for $12,000. At the end of 6 months, the bank will pay $13,000 to the certificate owner. Compute the nominal annual interest rate and the effective annual interest rate.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 26P

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A bank is offering to sell 6-month certificates of deposit for $12,000. At the end of 6 months, the bank will pay $13,000 to the certificate
owner. Compute the nominal annual interest rate and the effective annual interest rate.

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