A certificate of deposit (CD) is an agreement between a bank and a saver in whic

Question

A certificate of deposit (CD) is an agreement between a bank and a saver in which the bank guarantees an interest rate and the saver commits to leaving his or her deposit in the account for an agreed-upon period of time. First National Bank offers two-year CDs at 9.16% compounded daily, and Citywide Savings offers two-year CDs at 9.17% compounded quarterly. Compute the annual yield for each institution. (Round your answers to two decimal places.)
FNB_____%
CS_______%

Which bank has the more advantageous for the consumer?

Explanation / Answer

Here for FNB, the final value = (1 + 0.0916/365)365 = 1.0959

so annual yield = 9.59%

for CS, the final value = (1 + 0.0917/4)4 = 1.0949

so annual yield = 9.49%

so FNB bank is more advantageous for the consumer.

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