daisiewishes
New member
- Joined
- Sep 22, 2008
- Messages
- 2
Hi, my question is...
Bank A pays 4 percent interest, compunded annually, on deposits, while Bank B pays 3.5 percent compunded daily.
a.) Based on the EAR (or EFF%) which bank should you use?
b.) Could your choice be influenced by the fact that you might want to with draw the funds during the year as opposed to at the end of the year? Assume that your funds must be left on deposit during an entire compunding period in order to recieve any interest.
I used the EAR formula of (1 + 1Nom/M) ^m - 1.0 but I dont know where to go from there.
Bank A pays 4 percent interest, compunded annually, on deposits, while Bank B pays 3.5 percent compunded daily.
a.) Based on the EAR (or EFF%) which bank should you use?
b.) Could your choice be influenced by the fact that you might want to with draw the funds during the year as opposed to at the end of the year? Assume that your funds must be left on deposit during an entire compunding period in order to recieve any interest.
I used the EAR formula of (1 + 1Nom/M) ^m - 1.0 but I dont know where to go from there.