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You are considering three alternative investments: A three-year bank CD paying 7.18 percent compounded quarterly. Calculate eA three-year bank CD paying 7.48 percent compounded annually. Calculate effective annual interest rate (EAR)? (Round answer t

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Answer #1

Effective annual rate 7.38% =(1+7.18%/4)^4-1 Effective annual rate 7.21% =(1+6.98%/12)^12-1 Effective annual rate 7.48% 7.48%

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