Premier Federal Credit Union is offering a 2-year certificate ofdeposit with a stated rate of...

Premier Federal Credit Union is offering a 2-year certificate of deposit with a stated rate of 6.50% and quarterly compounding, The effective rate for the certificate is:

A. 6.6879%.

B. 6.6602%.

C. 6.6056%.

Expert Solution

The formula to find the effective rate is-

Effective rate = (1 + i/n)^n

Effective rate = (1 + 0.0650/4)^4 (4 as quaterly compounding)

Effective rate = (1+0.01625)^4

Effective rate = 0.066602 or 6.6602% (Option B)

jeff jeffy answered 2 years ago

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