Question
calculate the effective yield, then rank them from highest yield to lowest yield:
12% compound annually
11.8% compound quarterly
11.9% compound semiannually
11.7% compound daily
12% compound annually
11.8% compound quarterly
11.9% compound semiannually
11.7% compound daily
Answers
I'll take the last one.
The others are calculated similarly.
Principal, P= $1 (for comparison purposes)
Period = day
Number of periods, n = 365
Rate, R = 1+11.7%/365 = 1.000320548
Amount after one year
= PR^n
= 1*1.000320548^365
= 1.1241...
The equivalent annual interest is 12.41%
The others are calculated similarly.
Principal, P= $1 (for comparison purposes)
Period = day
Number of periods, n = 365
Rate, R = 1+11.7%/365 = 1.000320548
Amount after one year
= PR^n
= 1*1.000320548^365
= 1.1241...
The equivalent annual interest is 12.41%
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