Answered: Bank A pays 10% interest compounded…

Bank A pays 10% interest compounded annually on deposits, while Bank B pays 9% compounded daily. Based on the EAR (or EFF%), which bank should you use?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 3STP

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Bank A pays 10% interest compounded annually on deposits, while Bank B pays 9% compounded daily.

Based on the EAR (or EFF%), which bank should you use?

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