First National Bank pays 6.2% interest compounded semiannually. Second

QUESTION

First National Bank pays 6.2% interest compounded semiannually. Second National Bank pays 6% interest, compounded monthly. Which bank offers the higher effective annual rate?
First National Bank: Annual Interest Rate = 6.2% Effective Annual Interest Rate = [1 (0.062 / 2)] 2 1 Effective Annual Interest Rae = [1 0.031] 2 1 Effective Annual Interest Rate = [1.031] 2 1 Effective Annual Interest Rate = 0.06296 (or) 6.296% Effective Annual Rate of National Bank = 6.296% Second National Bank: Annual Interest Rate = 6% Effective Annual Interest Rate = [1 (0.06 / 12)] 12 1

ective Annual Interest Rae = [1 0.005] 12 1 Effective Annual Interest Rate = [1.005] 12 1 Effective Annual Interest Rate = 0.06167 (or) 6.167% Effective Annual Interest Rate of Second National Bank = 6.167% First National Bank has offered higher Effective Annual Rate

ANSWER:

CLICK REQUEST FOR  AN EXPERT SOLUTION