Question

You want to invest $25,000 and are looking for safe investment options. Your bank is offering you a certificate of deposit that pays a nominal rate of 4% that is compounded bimonthly (every two months). What is the effective rate of return that you will earn from this investment

Answer 1

Answer: HI there I think that I can help you!!!

6.14%

Explanation: Here is how I did it :)

The offered investment has a nominal rate (N) of 6% compounded quarterly (n=4 times a year). The effective rate of return (R) is obtained by:

The effective rate of return that you will earn from this investment is 6.14%.

*Note that the amount invested is not relevant when determining the effective rate of return, which means that the rate would be the same for any amount.