Question
In: Finance
A bank offers 6.00% on savings accounts. What is the effective annual rate if interest is...
A bank offers 6.00% on savings accounts. What is the effective annual rate if interest is compounded daily?
A bank offers 5.00% on savings accounts. What is the effective annual rate if interest is compounded continuously?
Solutions
Expert Solution
EAR = [1 + (APR / m)]^m − 1
EAR = [1 + (0.06 / 365)]^365 − 1 = 0.0618 or 6.18%
EAR = e^q − 1 = e^0.05 − 1 = 0.0513 or 5.13%
jeff jeffy answered 2 years agoRelated Solutions
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