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Unformatted text preview: % interest, how much money will you have in the account in 20 years? 107,652.4 Problems 1. You are considering the following one-year investments: (i) Bank A promises to pay 8% on you deposit compounded annually. (ii) Bank B promises to pay 8% on you deposit compounded daily. Compare the effective annual rate (EAR) on these investments. EAR = (1+ quoted rate / m ) m- 1 *Bank A would = (1.08/1) -1 =.08 *Bank B would = (1.08/365)-1=-.99 bank a would benefit....
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- Spring '11