May Wattson has 50000 to invest in a 4-year certificate of deposit that earns an interest rate of 3.75% compounded monthly or 3.50% compounded daily. Based on annual yield which is the better investment?

3.75% compounded monthly:

let the annual rate be i
1+i = (1 + .0375/12)^12
1+i = 1.038151..

i = .038151 = 3.8151 %

follow the same steps I showed you in your previous post for the daily compounding question.
Then compare the annual rates

To determine which investment option is better based on annual yield, we need to compare the effective annual interest rate for each option. The effective annual interest rate takes into account the compounding period and allows for a comparison between investments with different compounding frequencies.

Option 1: 3.75% compounded monthly
To calculate the effective annual interest rate for this option, we can use the formula:
Annual Interest Rate = (1 + (Interest Rate / Number of Compounding Periods)) ^ Number of Compounding Periods - 1

For option 1, the interest rate is 3.75%, and there are 12 compounding periods in a year (since it is compounded monthly).
Annual Interest Rate = (1 + (0.0375 / 12)) ^ 12 - 1

Option 2: 3.50% compounded daily
For option 2, the interest rate is 3.50%, and there are 365 compounding periods in a year (since it is compounded daily).
Annual Interest Rate = (1 + (0.0350 / 365)) ^ 365 - 1

Now let's calculate the annual yield for each option and compare them:

Option 1: (1 + (0.0375 / 12)) ^ 12 - 1
= (1 + 0.003125) ^ 12 - 1
≈ 0.037884 or 3.7884%

Option 2: (1 + (0.0350 / 365)) ^ 365 - 1
= (1 + 0.00009589) ^ 365 - 1
≈ 0.035144 or 3.5144%

Comparing the annual yields, we can see that Option 1 (3.7884%) has a higher effective annual interest rate than Option 2 (3.5144%). Therefore, based on annual yield, Option 1, which is the 4-year certificate of deposit with an interest rate of 3.75% compounded monthly, is the better investment option for May Wattson.