Assume a stated rate of interest of 8 percent.Which form of compounding will produce the highest effective rate of interest?

Question

Quizplus · Accepted Answer

Continuous compounding will produce the highest effective rate of interest because it involves compounding interest an infinite number of times per year. This results in a higher effective rate of interest compared to other forms of compounding, such as annual, semiannual, monthly, or daily compounding.

Assume a Stated Rate of Interest of 8 Percent