Question

14. Assume Julian has a choice between two deposit accounts. Account A has an annual percentage rate of 7.55 percent but with interest compounded monthly. Account B has an annual percentage rate of 7.45 percent with interest compounded continuously. Which account provides the highest effective annual return? (Please calculate the arithmetic solution and show your work)

Answer 1

first account:
i = .0755/12 = .006291666..
amount of $1
= 1(1.006291666)^12 = 1.078168

second account:
amount of $1
= 1 e^(.0745) = 1.07734

What do you think?

Answer 2

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