A) Bank A offers a 2-year certificate of deposit (CD) that pays 10 percent compounded annually....

A) Bank A offers a 2-year certificate of deposit (CD) that pays 10 percent compounded annually. Bank B offers a 2-year CD that is compounded semi-annually. The CDs have identical risk. What is the APR that Bank B would have to offer to make its EAR equivalent to the CD at Bank A?

Expert Solution

jeff jeffy answered 4 months ago

You invest $2,800 in a 4-year certificate of deposit (CD) that pays 3.8% interest, compounded annually....

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The bank offers a certificate of deposit (CD) with a stated interest rate of 8.00% per year, compounded semi-annualy.

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