You plan to invest some money in a bank account.Which of the following banks provides you with the highest effective rate of interest?
A)Bank 1; 6.0% with monthly compounding
B)Bank 2; 6.0% with annual compounding
C)Bank 3; 6.0% with quarterly compounding
D)Bank 4; 6.0% with daily (365-day) compounding

Question

Quizplus · Accepted Answer

Bank 4 offers the highest effective rate of interest as it compounds daily (365-day compounding). This means that interest is calculated and added to your account every day, resulting in a higher effective rate of interest compared to the other options that compound less frequently.

You Plan to Invest Some Money in a Bank Account