Question 3, Part 2

QRB/501

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

Semiannually

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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)                     ________________________________-