Ask Question
29 March, 00:01

You have a savings account in which you leave the funds for one year without adding to or withdrawing from the account. Which would you rather have: a daily compounded rate of 0.055 %, a weekly compounded rate of 0.355 %, a monthly compounded rate of 1.25 %, a quarterly compounded rater of 4.50 %, a semiannually compounded rate of 8.5 %, or an annually compounded rate of 18 %? What is the effective annual rate (EAR) of a daily compounded rate of 0.055 %? 22.23 % (Round to two decimal places.) What is the EAR of a weekly compounded rate of 0.355 %? 20.23 % (Round to two decimal places.) What is the EAR of a monthly compounded rate of 1.25 %?

+1
Answers (1)
  1. 29 March, 02:54
    0
    a daily compounded rate of 0.055 %

    Explanation:

    we multiply by the suberiodic capitalization and compare each other

    Daily compounding

    APR = 0.055 x 365 = 20.075%

    Effective rate:

    (1+0.00055) ^365 - 1 = 0.222251701 = 22.22%

    Weekly compounding:

    APR 0.355 x 52 = 18.46%

    Effective rate

    (1 + 0.355) ^52 - 1 = 0.202344149 = 20.23%

    Montly Compounding

    APR = 1.25 x 12 = 15%

    effective rate

    (1 + 0.0125) ^ 12 - 1 = 0.160754518

    Quarterly compounding

    APR 4.5 x 4 = 18%

    Semiannually compounding

    APR 8.5 x 2 = 17%

    annual APR 18%

    The best option would be the daily compounding of 20.075%
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “You have a savings account in which you leave the funds for one year without adding to or withdrawing from the account. Which would you ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers