Finance Assignment | Professional Writing
(Calculating anEAR) Your grandmother asks for your help in choosing a certificate of deposit (CD) from a bank with a one-year maturity and a fixed interest rate. The first certificate of deposit, CD #1, pays 3.95 percent APR compounded monthly, while the second certificate of deposit, CD #2, pays 4.00 percent APR compounded daily. What is the effective annual rate (the EAR) of each CD and which CD do you recommend to yourgrandmother?
If the first certificate of deposit, CD #1, pays 3.95 percent APR compounded monthly, the EAR for the deposit is _% (Round to two decimal places)
If the second certificate of deposit, CD #2, pays 4.00 percent APR compounded daily, the EAR for the deposit is _% (Round to two decimal places)
Based on the findings above, which CD do you recommend to your grandmother?
- CD #2 that pays 4.00% compounded daily
- CD #1 that pays 3.95% compounded monthly
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