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A bank offers 9.00% on savings accounts. What is the effective annual rate if interest is...

A bank offers 9.00% on savings accounts. What is the effective annual rate if interest is compounded monthly?

Answer format: Percentage Round to: 4 decimal places (Example: 9.2434%, % sign required. Will accept decimal format rounded to 6 decimal places (ex: 0.092434))

Solutions

Expert Solution

EAR=[(1+APR/m)^m]-1
where m=compounding periods

=[(1+0.09/12)^12]-1

which is equal to

=9.3807%(Approx)

jeff jeffy answered 2 years ago
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