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Effective annual rate for a one-year deposit

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Consider the conditions of this deposit at this bank: Quoted interest rate of 3.45% compounded monthly for the first 4 months. After that a regular interest rate of 1.19% compounded monthly, will be applied.

a) Show that the quoted interest rate of 3.45% compounded monthly is the same as the effective annual
interest rate of 3.5%.

b) What would be the effective annual rate for a one-year deposit?

c) What would be the effective annual rate for a two-year deposit?

d) What would be the effective annual rate for a 10-year deposit?

Reference no: EM133069489

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