3. A bank pays 4% compounded annually. At the end of 4 years, a 2% bonus is paid on the balance. If $1000 is invested for 4 years, what is the effective annual rate of interest earned by the investor?

3. A bank pays 4% compounded annually. At the end of 4 years, a 2% bonus is paid on the balance. If $1000 is invested for 4 years, what is the effective annual rate of interest earned by the investor?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 3STP

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3.
A bank pays 4% compounded annually. At the end of 4 years, a 2% bonus is paid on the
balance. If $1000 is invested for 4 years, what is the effective annual rate of interest earned by the
investor?

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