You have three choices in placing your money in a bank account. ◼ Bank A pays 6.12% compounded annually. ◼ Bank B pays 6.00% compounded quarterly. ◼ Bank C pays 5.90% compounded continuously. Which bank would you open an account with?
Consider that rates for each type of account are different so you need to convert first all the rates to annually.
Using the formula to convert rates: (1+i)^(n2/n2)-1 you can calculate the rate and compare.
The bank that will pay more interest anually will be Bank B due to rate is 26% in comparison to Bank A which only is 6.12%. Rate for Bank C is too small so I wouldn´t choose this bank.
