On the first of the year, James invested x dollars at Proudstar bank in an account that yields 0.5% 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?
Select.
A) 2.04%
B) 4.12%
C) 5%
D) 8.25%
E) 10%
Per quarter, interest = 0.5% So for a year, interest = 2% Due to quarter cumulation, effective yield (YTM) would be slight higher than 2% 2.04%nswer = 2.04% =2.04%NSWER:2.04%
<result>A</result>
On the first of the year, James invested x dollars at Proudstar bank in an account that yields 0.5% 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?