Four banks are offering the same interest rate of 4%.Where do you invest?
A) Bank A compounds interest on a yearly basis.
B) Bank B compounds interest on a monthly basis.
C) Bank C compounds interest on a daily basis.
D) I am indifferent between banks.

Question

Quizplus · Accepted Answer

Compounding interest daily results in a slightly higher effective annual rate compared to monthly or yearly compounding, due to the principle of earning interest on interest more frequently.

Four Banks Are Offering the Same Interest Rate of 4