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You have a savings account in which you leave the funds for one year without adding to or withdrawing from the account

Finance Sep 27, 2020

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 0.035?%, a weekly compounded rate of 0.285?%, a monthly compounded rate of 1.45?%, a quarterly compounded rater of 3.50?%, a semiannually compounded rate of 8?%, or an annually compounded rate of 18?%?

 

I need the answer to What is the EAR of a weekly compounded rate of 0.285?%?

a monthly compounded rate of 1.45?%

a quarterly compounded rater of 3.50?%

a semiannually compounded rate of 8?%,

an annually compounded rate of 18?%?

Expert Solution

A daily compounded rate of 0.035?%;

EAR = (1 + Periodic Rate)C/Y- 1

= (1.00035)365- 1

= 1.1362 -1

= 0.1362 or 13.62%

 

EAR of a weekly compounded rate of 0.285?%;

EAR = (1 + Periodic Rate)C/Y- 1

= (1+ 0.285%)52- 1

= 1.1595 -1

= 0.1595 or 15.95%

 

A monthly compounded rate of 1.45?%;

EAR = (1 + Periodic Rate)C/Y- 1

= (1+ 1.45%)12- 1

= 1.18857 - 1

= 0.18857 or 18.86%

 

A quarterly compounded rater of 3.50?%;

EAR = (1 + Periodic Rate)C/Y- 1

= (1+ 3.50%)4- 1

= 1.1475 -1

= 0.1475 or 14.75%

 

A semiannually compounded rate of 8?%;

EAR = (1 + Periodic Rate)C/Y- 1

= (1+ 8%)2- 1

= 1.1664 -1

= 0.1664 or 16.64%%

 

An annually compounded rate of 18?%;

EAR = (1 + Periodic Rate)C/Y- 1

= (1+ 18%)1- 1

= 1.18 -1

= 0.18 or 18%

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