Posted by Thara on Wednesday, July 29, 2009 at 10:29pm.
A bank offers a rate of 5.3% compounded semiannually 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%
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