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12 January, 06:02

Charter bank pays a 5.00% nominal rate on deposits, with monthly compounding. what effective annual rate (eff%) does the bank pay?

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  1. 12 January, 09:54
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    In order to compute for the effective annual rate, the working equation would be [ (1 + i/n) ^n] - 1. The i corresponds to the nominal rate while n is the number of compounding periods per year which in this case is 12. The answer would be 5.116%.
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