also need monthly, semi annually and annnually & P5-2 (similar to) Question Help

Question

also need monthly, semi annually and annnually

& P5-2 (similar to) Question Help * Periodic interest rates. 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 da compounded rate o O 45%, a weekly c mpounded rate of 0285%, a monthly compounded rate o 1.25%, a quarter y compounded rater of 3.50%, a semiannually rate of 7.5%, or an annually compounded rate of 16%? What is the effective annual rate (EAR) of a daily compounded rate of 0.045%? 17.85 % (Round to two decimal places.) What is the EAR of a weekly compounded rate of 0.285%? % (Round to two decimal places.)

Explanation / Answer

Weekly:

( 1 + 0.00285)52 - 1 = 0.1595 or 15.95%

Monthly:

( 1 + 0.0125)12 - 1 = 0.1608 or 16.08%

Quarterly:

( 1 + 0.035)4 - 1 = 0.1475 or 14.75%

Semi annually:

( 1 + 0.075)2 - 1 = 0.1556 or 15.56%

Annual:

( 1 + 0.16)1 - 1 = 0.16 or 16%

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