Bank A pays 15% interest, compounded monthly, on its money market account. What is the effective...

Bank A pays 15% interest, compounded monthly, on its money market account. What is the effective annual rate?

Solutions

Expert Solution

Annual interest=15% compounded monthly

=1.25% per month compounded monthly

Hence effective annual rate=(1+monthly rate)^12-1

=(1+0.0125)^12-1

=1.160755-1=0.160755=16.0755%

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

1. If you deposit $8,177 in a bank account that pays 7% interest compounded monthly, how...

1. If you deposit $8,177 in a bank account that pays 7% interest compounded monthly, how much will be in your account after 8 years? Please round your answer to the second decimal without dollar sign (e.g. 0.00) 2. If you deposit your money in a bank account that pays 8.66% interest compounded weakly, what is the effective annual rate (EAR)? Please round your answer to the fourth decimal (e.g. 0.0000) 3. If you plan to apply for a PhD...

Effective versus nominal interest rates Bank A pays 9% interest compounded annually on deposits, while Bank...

Effective versus nominal interest rates Bank A pays 9% interest compounded annually on deposits, while Bank B pays 8.5% compounded daily. Based on the EAR (or EFF%), which bank should you use? You would choose Bank A because its EAR is higher. You would choose Bank B because its EAR is higher. You would choose Bank A because its nominal interest rate is higher. You would choose Bank B because its nominal interest rate is higher. You are indifferent between...

You put $5,000 into an account that pays 3% annual interest. Interest is compounded monthly. You...

You put $5,000 into an account that pays 3% annual interest. Interest is compounded monthly. You keep this money in the account for 10 years. How much money will you have? $750 $6,746 $5.750 $6,720 $8,144 Ali buys his wife a valuable piece of jewelry (diamond necklace) for $30,000. He purchases it using $25,000 from his savings account and a $5,000 loan. How does this purchase affect Ali's personal balance sheet? Choose the most correct answer. a. His assets increase....

1.) If the account earns an interest rate of 24% compounded monthly, find the effective rate...

1.) If the account earns an interest rate of 24% compounded monthly, find the effective rate of interest: A. Compounded daily 360 days B. Compounded daily 365 days C. Compounded weekly D. Compounded monthly E. Compounded quarterly F. Compounded semi-annually G. Compounded annually 2.) What is the effective annual interest rate for a nominal interest rate of 24% compounded continuously?

Suppose an investor plans to make monthly deposits into an account that pays 9% interest, compounded...

Suppose an investor plans to make monthly deposits into an account that pays 9% interest, compounded monthly, so that $100,000 will be in the account immediately after the payment at the end of Year 10. The first payment will occur at the end of Month 1 (one month from the present). How much must be deposited monthly? A. $517 per month B. $9,670 per month C. $6,580 per month D. $9,67 per month

You have invested money in a savings account that pays a fixed monthly interest on the...

You have invested money in a savings account that pays a fixed monthly interest on the account balance. The following table shows the account balance over the first 5 months. Time in months Savings balance 0 $1500.00 1 $1521.00 2 $1542.29 3 $1563.88 4 $1585.77 5 $1607.97 (a) How much money was originally invested? $ (b) Show that the data are exponential. (Round your answer to three decimal places.) Each successive ratio of new/old is , which shows that the data...

(a) What interest rate compounded monthly is equivalent to (has the same APY as) 15% compounded...

(a) What interest rate compounded monthly is equivalent to (has the same APY as) 15% compounded semi-annually? (b) What interest rate compounded continuously is equivalent to (has the same APY as) 15% compounded semi-annually?

Bank A pays 2% interest compounded annually on deposits, while Bank B pays 1.75% compounded daily....

Bank A pays 2% interest compounded annually on deposits, while Bank B pays 1.75% compounded daily. What would be the effective annual rate (EAR) that you would earn if you chose to deposit money in Bank B? Provide your answer in percentage format without using the % sign. Round to two decimal places. To be marked correct, the answer provided needs to be +/- 0.01 from the actual answer.

Bank A pays 7% interest compounded annually on deposits, while Bank B pays 6% compounded daily....

Bank A pays 7% interest compounded annually on deposits, while Bank B pays 6% compounded daily. a. Based on the EAR (or EFF%), which bank should you use? You would choose Bank A because its EAR is higher. You would choose Bank B because its EAR is higher. You would choose Bank A because its nominal interest rate is higher. You would choose Bank B because its nominal interest rate is higher. You are indifferent between the banks and your...

Mr smith plans to deposit money in a bank that pays 10% interest per year, compounded...

Mr smith plans to deposit money in a bank that pays 10% interest per year, compounded daily. what the effective rate of interest will he receive (a) yearly, (b) semiannually? Answers (a) 10.515% (b) 5.0625%

Subjects