Multiple compounding periods (FV): Your mother is trying to choose one of the following bank term deposits to invest $10,000. Which one will have the highest future value if she plans to invest for three years?
A) 3.5% compounded daily
B) 3.25% compounded monthly
C) 3.4% compounded quarterly
D) 3.75% compounded annually.

Question

Quizplus · Accepted Answer

Compounding more frequently at a slightly lower rate can yield a higher future value. Option A, with daily compounding at 3.5%, will result in the highest future value due to the effect of more frequent compounding periods.

Multiple Compounding Periods (FV): Your Mother Is Trying to Choose