Allied Bank pays 4% interest compounded annually on deposits, while bonkers Bank pays 3.5% compounded daily. a. Based on the EAR which bank should you use? b. Could your choice of banks be influenced by the fact that you might want to with draw your funds during the year as opposed to at the end of the year? Assume that your funds must be left on deposit during an entire compounding period in order to receive any interest.
Allied Bank pays 4% interest compounded annually on deposits, while bonkers Bank pays 3.5% compounded daily. a. Based on the EAR which bank should you use? b. Could your choice of banks be influenced by the fact that you might want to with draw your funds during the year as opposed to at the end of the year? Assume that your funds must be left on deposit during an entire compounding period in order to receive any interest.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Allied Bank pays 4% interest compounded annually on deposits, while bonkers Bank pays 3.5% compounded daily.
a. Based on the EAR which bank should you use?
b. Could your choice of banks be influenced by the fact that you might want to with draw your funds during the year as opposed to at the end of the year? Assume that your funds must be left on deposit during an entire compounding period in order to receive any interest.
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