Solution
Given
Principal: $5300
rate: 2.5% = 0.025
n = 12
t = 1
a)
[tex]\begin{gathered} A=P(1+\frac{r}{n})^{nt} \\ \\ \Rightarrow A=5300(1+\frac{0.025}{12})^{12\times1}=\$5434.03 \end{gathered}[/tex]
b)
The effective annual interest is;
[tex]\begin{gathered} EAR=(1+\frac{r}{n})^n-1 \\ \\ \Rightarrow EAR=(1+\frac{0.025}{12})^{12}-1=0.025288=2.53\% \end{gathered}[/tex]
