Reference no: EM131798888

Based upon this case

: James Olds buys a four-year, $1,000,000 certificate of deposit from the Second National Bank. James will receive 5% interest in year 1; 5.5% in year 2; 6% in year three; and 6.5% interest in year 4. If James "redeems" this certificate before the maturity date, he would receive a cumulative 4.5% annual rate of interest of 4.5%. The Bank has ascertained that less than one percent of its depositors redeem their certificates before the maturity date. The bank asks its accountant how to accrue and measure such interest payment obligations. and this Answer:

: Per 450-20-25-1 and 3, since only a remote possibility of early withdrawals exists, the Bank should use the above, monthly pro rata approach to recognize the interest due to James.

I do not see were it says they should use a pro-rata approach anywhere in the 450-20-25 sections