A bank offers a rate of 5.3% compounded semiannually on its four -year GICs. What monthly and annually compounded rates should it quote in order to have the same effective interest rate at all three nominal rates?
0 yr1 yr2 yr3 yr4
i = 5.3%/2
n = 4
p(1 + 0.053/2)^2 * 4
That's as far as i got and after that i am stuck on what to do next?
August 4th 2009, 07:35 PM
Originally Posted by diehardmath4
A bank offers a rate of 5.3% compounded semiannually on its four -year GICs.
The fact that this rate is on 4year GIC's has nothing to do with solution.
The question can be simplified to:
what annually compounded rate and what monthly compounded rate
is equivalent to 5.3% compounded semiannually?