Question

First National Bank offers two-year CDs at 9.15% compounded daily, and citywide savings offers two-year CDs at 9.16% compounded quarterly. Compute the annual yield for each institution. (Round your answer to two decimal places.)

Answer 1

1.

EAR = [(1 +stated rate/no. of compounding periods) ^no. of compounding periods - 1]* 100

Effective Annual Rate = ((1+9.15/365*100)^365-1)*100

Effective Annual Rate% = 9.58

EAR = [(1 +stated rate/no. of compounding periods) ^no. of compounding periods - 1]* 100

Effective Annual Rate = ((1+9.16/4*100)^4-1)*100

Effective Annual Rate% = 9.48