Concept explainers
The annual interest rate r, when compounded more than once a year, results in a slightly higher yearly interest rate; this is called the annual (or effective) yield and denoted as Y. For example, $1000 deposited at 5%, compounded monthly for 1 yr (12 months), will have a value of
For Exercises 41-48, find the annual yield as a percentage, to two decimal places, given the annual interest rate and the compounding frequency.
Stockman’s Bank will pay 4.2%, compounded annually, on a savings account. A competitor, Mesalands Savings, offers monthly compounding on savings accounts. What is the minimum annual interest rate that Mesalands needs to pay to make its annual yield exceed that of Stockman’s?
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Calculus and Its Applications (11th Edition)
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