Problembank a offers a 2-year certificate of deposit cd, Ask an Expert

Accounting

Problem:

Bank A offers a 2-year certificate of deposit (CD) that pays 10 percent compounded annually. Bank B offers a 2-year CD that is compounded semi-annually. The CDs have identical risk.

Required:

Question: What is the stated, or simple, rate that Bank B would have to offer to make you indifferent between the two investments?

Note: Please provide reasons to support your answer.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91169302

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