On the first of the year, James invested x dollars at Proudstar bank in an account that yields 2.5% in interest every quarter year. At the end of the year, during which he made no additional deposits or withdrawals, he had y dollars in the account. If James had invested the same amount in an account which pays interest on a yearly basis, what must the interest rate be for James to have y dollars at the end of the year?
Choose the correct choice from the following choices:
A) 22.04%
B) 16.12%
C) 8%
D) 18.25%
E) 10.5%
Per quarter, interest = 2.5% So for a year, interest = 10% Due to quarter cumulation, effective yield (YTM) would be slight higher than 10% Answer = 10.5% =ANSW10.5%R:10.5%
<result>E</result>
On the first of the year, James invested x dollars at Proudstar bank in an account that yields 2.5% in interest every quarter year. At the end of the year, during which he made no additional deposits or withdrawals, he had y dollars in the account. If James had invested the same amount in an account which pays interest on a yearly basis, what must the interest rate be for James to have y dollars at the end of the year?