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    Effective Annual Rate for First National Bank

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    57. Effective Rates. First National Bank pays 6.2 percent interest compounded semiannually.
    Second National Bank pays 6 percent interest, compounded monthly. Which bank offers the higher effective annual rate?

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    Solution Preview

    We will use the following formula:

    EIR= (1+i/m)^m*n -1
    EIR= Effective Interest rate, m= number of ...

    Solution Summary

    The solution provides the steps to calculate the effective annual rate.