Bank A offers a 2-year certificate of deposit (CD)that pays 10 percent compounded annually.Bank B offers a 2-year CD that is compounded semi-annually.The CDs have identical risk.What is the stated,or nominal,rate that Bank B would have to offer to make you indifferent between the two investments?
A) 9.67%
B) 9.76%
C) 9.83%
D) 9.87%
E) 9.93%

Question

Quizplus · Accepted Answer

Effective interest rate = 11ea7fdb_fc23_049c_a768_cf07aaf762f8_TB2902_00 - 1
.10 = 11ea7fdb_fc23_049d_a768_db1f2a533ead_TB2902_00 - 1
1.10 = 11ea7fdb_fc23_049e_a768_d31f187818ad_TB2902_00 1.0488 = 11ea7fdb_fc23_049f_a768_01ffe5c22a77_TB2902_00 .0488 = 11ea7fdb_fc23_2bb0_a768_21e88452988a_TB2902_00 i = 9.76%

Bank a Offers a 2-Year Certificate of Deposit (CD)that Pays