The dollar amount of interest is largest for a four-year loan if the interest is compounded
A) daily.
B) monthly.
C) annually.
D) once every two years.

Question

Quizplus · Accepted Answer

The interest amount is largest when it is compounded more frequently. Compounding daily means there are 1,460 compounding periods in a four-year period, while monthly compounding only has 48 compounding periods in four years. Therefore, the interest will be highest if the interest is compounded daily.

The Dollar Amount of Interest Is Largest for a Four-Year