ABC Bank offers term deposits with 8 percent compounded annually,while XYZ Bank offers term deposits with 7.8 percent compounded monthly.ABC Bank offers a higher effective yield.

Question

Quizplus · Accepted Answer

When interest is compounded more frequently (e.g., monthly) at a slightly lower rate, it can lead to a higher effective yield than a higher rate compounded annually due to the effects of compounding interest more often.

ABC Bank Offers Term Deposits with 8 Percent Compounded Annually,while