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  • SW 5 Problem No. 28

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    whee manobal
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    The document is solving a bank interest rate problem. It is given that the advertised interest rate is 9% and the annual effective rate is 9.344%. Using the compound interest formula, it tries different compounding periods of monthly, quarterly, and bimonthly. It determines that only with bimonthly compounding does the effective rate equal the given 9.344%. Therefore, the interest must be compounded bimonthly.

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    ENGINEERING MATHEMATICS

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    sw-5-problem-no.-28

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    The document is solving a bank interest rate problem. It is given that the advertised interest rate is 9% and the annual effective rate is 9.344%. Using the compound interest formula, it tries different compounding periods of monthly, quarterly, and bimonthly. It determines that only with bimonthly compounding does the effective rate equal the given 9.344%. Therefore, the interest must be compounded bimonthly.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    9 views2 pages

    SW 5 Problem No. 28

    Uploaded by

    whee manobal
    The document is solving a bank interest rate problem. It is given that the advertised interest rate is 9% and the annual effective rate is 9.344%. Using the compound interest formula, it tries different compounding periods of monthly, quarterly, and bimonthly. It determines that only with bimonthly compounding does the effective rate equal the given 9.344%. Therefore, the interest must be compounded bimonthly.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 2

    Problem No.

    28

    A bank is advertising 9% accounts that yield 9.344% annually. How often is the interest
    compounded?

    A. Daily B. monthly C. Bimonthly D. Quarterly

    Given:

    i = 9.5%

    ERi= 9.344%

    Solution:
    m
    ERi=(1+i) −1

    By trial and error we need to get ERi= 9.344%

    Try monthly = m=12

    ( ) −1=9.938 %
    12
    0.09
    ERi= 1+
    12

    Monthly isn’t the answer

    Quarterly = m= 4

    (
    ERi= 1+
    0.09 4
    4 )
    −1=9.308 %

    Quarterly isn’t the answer

    Bimonthly= m = 6

    ( )
    6
    0.09
    ERi= 1+ −1=9.344 %
    6

    ERi=9.344 %

    Therefore the answer is C. Bimonthly

    Problem No. 28

    A bank is advertising 9% accounts that yield 9.344% annually. How often is the interest
    compounded?
    A. Daily B. monthly C. Bimonthly D. Quarterly

    Given:

    i = 9.5%

    ERi= 9.344%

    Solution:

    ERi=(1+i)m−1

    By trial and error we need to get ERi= 9.344%

    Try monthly = m=12

    ( ) −1=9.938 %
    12
    0.09
    ERi= 1+
    12

    Monthly isn’t the answer

    Quarterly = m= 4

    (
    ERi= 1+
    4 )
    0.09 4
    −1=9.308 %

    Quarterly isn’t the answer

    Bimonthly= m = 6

    (
    ERi= 1+
    6 )
    0.09 6
    −1=9.344 %

    ERi=9.344 %

    Therefore the answer is C. Bimonthly

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