Question

You have $5,000 that you want to use to open a savings account. There are five banks located in your area. The rates paid by banks A through E, respectively, are given below. Which bank should you select if your goal is to maximize your interest income?

		"4.10 percent, compounded continuously"
		"4.25 percent, compounded semi-annually"
		"4.20 percent, compounded quarterly"
		"4.15 percent, compounded monthly"
		"4.28 percent, compounded annually"

Answer 1

Effective interest rate is more in semi annually. Select semi annually.

4.25 percent, compounded semi-annually"

Effective annual rate:

Formulas:

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