Posted by **Thara** on Wednesday, July 29, 2009 at 10:29pm.

A bank offers a rate of 5.3% compounded semi-annually on its four year GICs(Guaranteed Investment Certificates). What monthly and annually compounded rates should it quote in order to have the same effective interest rate at all three nominal rates?

- math & finance -
**MathMate**, Thursday, July 30, 2009 at 6:07pm
See double post:

http://www.jiskha.com/display.cgi?id=1248989599

- math & finance -
**economyst**, Thursday, July 30, 2009 at 6:11pm
first calculate the annual equivalence

(1+.053/2)^2 = 1.0537 ergo, the equivalent annual rate is 5.37%

Let the monthly equivalent rate be x.

So (1+x/12)^12 = 1.0537

12ln(1+x/12) = ln(1.0537) = .0523078

ln(1+x/12) = .00435898

(1+x/12) = e(.00435898) = 1.0043685

x/12 = .0043685

x = .05242

annual rate is 5.242%

## Answer This Question

## Related Questions

- compounded interest - A bank offers a rate of 5.3% compounded semi-annually on ...
- Compound Interest - A bank offers a rate of 5.3% compounded semi-annually on its...
- Math! - A credit Union pays 8.25% comppunded annually on 5-year compound-...
- Math - How to calculate this? 4 year term investment. The investment offers a ...
- Mathematics - In the problems 1 to 3, find the present value of the given (...
- finance - You have found three investment choices for a one year deposit: 10% ...
- Foundations Math 12 - Jie is investing $15000 and is choosing between two ...
- Finance - An investment pays 9 percent interest compounded semi-annually. What ...
- Finance Basic Interest - The effective monthly equivalent of 4% compounded semi-...
- MATHS - A SUM OF MONEY IS KEPT IN A BANK AT 8% INTEREST COMPOUNDED ANNUALLY.HAD ...

More Related Questions