Given a stated interest rate,which form of compounding will yield the highest effective rate of interest?
A)Annual compounding
B)Monthly compounding
C)Daily compounding
D)Continuous compounding
E)Semiannual compounding

Question

Quizplus · Accepted Answer

Continuous compounding is the process of calculating interest where interest is added to the principal constantly and instantaneously. This means as time goes on, the income earned from interest continues to compound at an increasingly rapid rate. As a result, continuous compounding yields the highest effective rate of interest compared to annual, monthly, daily, and semiannual compounding.

Given a Stated Interest Rate,which Form of Compounding Will Yield