ABC Bank offers term deposits with 8 percent compounded quarterly, while XYZ Bank offers term deposits with 7.8 percent compounded annually. We know that ABC Bank offers a higher annualized rate of return.

Question

Quizplus · Accepted Answer

This is because compounding quarterly is more frequent than compounding annually, which means that the interest earned on the deposit will be reinvested more frequently, resulting in a higher annualized rate of return.

ABC Bank Offers Term Deposits with 8 Percent Compounded Quarterly