travisalier6826 travisalier6826
  • 10-09-2017
  • Business
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Charter bank pays a 5.00% nominal rate on deposits, with monthly compounding. what effective annual rate (eff%) does the bank pay?

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YellowGold
YellowGold YellowGold
  • 21-09-2017

In order to compute for the effective annual rate, the working equation would be [( 1 + i/n)^n] – 1.   The i corresponds to the nominal rate while n is the number of compounding periods per year which in this case is 12. The answer would be 5.116%.  

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