If Bank A pays interest on a monthly basis and Bank B pays the same interest rate, but on a quarterly basis, then investing $1,000 in Bank B will result in a higher future value compared to investing the same amount in Bank A.

Question

Quizplus · Accepted Answer

Interest compounded more frequently (monthly in this case) will result in a higher future value due to the effect of compounding interest on the principal more often.

If Bank a Pays Interest on a Monthly Basis and Bank