Answered: Bank A pays 5% interest compounded…

Bank A pays 5% interest compounded annually on deposits, while Bank B pays 4.8% compounded monthly. Based on the EAR (or EFF%), which bank should you use? Describe how you reach your final answer

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 5% interest compounded annually on deposits, while Bank B pays 4.8% compounded monthly. Based on the EAR (or EFF%), which bank should you use? Describe how you reach your final answer

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