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Question 3, Part 2


Sylvester, current bank is offering a 1 year certificate of deposit (CD) account paying 2 % compounded semiannually. Another bank is offering the same 2% but compounded daily. If Sylvester invest his $100,000 in the second bank, how much would he earn after one year, as a result of the daily compounding.

                                                                             Current bank                           Competitor bank daily



Initial investment (PV)                                        $100,000                               $100,000   

Quoted Rate                                                                      2%                                            2%

Compounding frequency                                                 2                                           365

Number of compounding (m)                                        

Quoted rate divided by m =rate

Number of years                                                              1                                             1

NPER (num. of Years*m)

Ending Amount (FV)                     ________________________________-

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