You have three choices in placing your money in a bank account. ◼ Bank A pays 6.12% compounded annually. ◼ Bank B pays 6.00% compounded quarterly. ◼ Bank C pays 5.90% compounded continuously. Which bank would you open an account with?

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Pedro Golden

Business

30 October, 21:26

You have three choices in placing your money in a bank account. ◼ Bank A pays 6.12% compounded annually. ◼ Bank B pays 6.00% compounded quarterly. ◼ Bank C pays 5.90% compounded continuously. Which bank would you open an account with?

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Virginia Ibarra · Answer 1

Consider that rates for each type of account are different so you need to convert first all the rates to annually.

Using the formula to convert rates: (1+i) ^ (n2/n2) - 1 you can calculate the rate and compare.

The bank that will pay more interest anually will be Bank B due to rate is 26% in comparison to Bank A which only is 6.12%. Rate for Bank C is too small so I wouldn't choose this bank.