(b) Once upon a time, a bank was advertising an interest rate for savings account of i% per year. A competitor advertised a rate of i% per year compounded semiannually. The first bank advertised that they paid i% per year compounded quarterly. The other bank changed theirs to being compounded monthly. The first bank changed theirs to compounded daily. Finally, a bank said their interest rate was i% per year com- pounded continuously. What is the effective annual rate of 6% per year compounded semiannually? monthly? and continuously?
(b) Once upon a time, a bank was advertising an interest rate for savings account of i% per year. A competitor advertised a rate of i% per year compounded semiannually. The first bank advertised that they paid i% per year compounded quarterly. The other bank changed theirs to being compounded monthly. The first bank changed theirs to compounded daily. Finally, a bank said their interest rate was i% per year com- pounded continuously. What is the effective annual rate of 6% per year compounded semiannually? monthly? and continuously?
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 12MC: (1) What is the value at the end of Year 3 of the following cash flow stream if the quoted interest...
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