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%

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