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Question 3, Part 2 QRB/501 Sylvester, current bank is offering a 1 year certificate of deposit (CD) account paying 2 % compounded semiannually.
Question 3, Part 2
QRB/501
Sylvester, current bank is offering a 1 year certificate of deposit (CD) account paying 2 % compounded semiannually. Another bank is offering the same 2% but compounded daily. If Sylvester invest his $100,000 in the second bank, how much would he earn after one year, as a result of the daily compounding.
Current bank Competitor bank daily
Semiannually
_______________________________________________
Initial investment (PV) $100,000 $100,000
Quoted Rate 2% 2%
Compounding frequency 2 365
Number of compounding (m)
Quoted rate divided by m =rate
Number of years 1 1
NPER (num. of Years*m)
Ending Amount (FV) ________________________________-
