Bank B: 1+r = (1+.025/4)^4 = 1.0252. So the effective rate is 2.52%.
Bank C: 1+r = (1+.0249/12)^12 = 1.02518. So the effective rate is 2.518%.
Go with Bank B!
Can someone explain how to do this?!
You are looking for a safe place to put dollar-sign 25 Number , 000 for one year. You go online and find that three banks are offering the following rates for CDs. Find the effective rate for each to determine which would earn you the most interest at the end of one year.
Bank A 2.47 % continuously
Bank B 2.50 % quarterly
Bank C 2.49 % month
