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March 28, 2017

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14. Assume Julian has a choice between two deposit accounts. Account A has an annual percentage rate of 7.55 percent but with interest compounded monthly. Account B has an annual percentage rate of 7.45 percent with interest compounded continuously. Which account provides the highest effective annual return? (Please calculate the arithmetic solution and show your work)

  • finance - ,

    first account:
    i = .0755/12 = .006291666..
    amount of $1
    = 1(1.006291666)^12 = 1.078168

    second account:
    amount of $1
    = 1 e^(.0745) = 1.07734

    What do you think?

  • finance - ,

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