Suppose you saw an advertisement in the newspaper for a financial planner who wa

Question

Suppose you saw an advertisement in the newspaper for a financial planner who was recommending a certificate of deposit that paid 5.2% interest compounded semiannually. In the fine print at the bottom of the advertisement, it stated that the APY on the CD was 5.27%

Was this advertisement accurate? Explain.

Select the correct choice below and, if necessary, fill in the answer box to complete your choice.

A.

No. The number of compounding periods is incorrect. Interest should be compounded daily.

B.

No. The APY is incorrect. The correct APY is ____%.

(Round to the nearest hundredth as needed.)

C.

Yes. The information in the advertisement is accurate.

Explanation / Answer

APY= (1+interest/t)^t-1, t in years

=(1+0.052/2)^2-1

=0.052676

in percent APY on CD is 5.27%

Answer C The information in the advertisement is accurate is correct

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