Question: Do Self -Test problem ST 5-1 on Textbook P. 232. Below is a summary of the problem. Assume you have $10,000 to deposit in a

Do Self -Test problem ST 5-1 on Textbook P. 232. Below is a summary of the problem.

Assume you have $10,000 to deposit in a bank for 3 years. Bank A compounds interest annually, Bank B compounds interest semi-annually, Bank C compounds interest quarterly. All three banks have a stated annual interest rate of 4%.

What amount would you have after three years, in each bank?

What APY (annual percentage yield) or EAR (effective annual interest rate) would you earn in each bank?

Based on your answers in (1) and (2), which bank should you deal with? Why?

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