Abi wishes to invest RM8,000 in a fixed deposit account for one year. He has two options: AAA Bank which offers 3.7% interest compounded semi-annually.
BBB Bank which offers 3.75% interest compounded annually.
Which bank should Aoose? Give your reason.
simply find the interest rate compounded annually equivalent to
3.7% interest compounded semi-annually
let the annual rate be i
1 + i = (1 + .037)^2
1 + i = 1.03734
i = .03734 which is 3.734 % compounded annually.
So...., what do you think?