Certain investments compound interest at different intervals. What effect does the size of the compounding interval have on the yield of the investment?

Answer 1

take a look at the graph of

(1+.10/n)^(n)

It shows the effective yield of 10% compounded n times per year.

It approaches continuous compounding, e^.1

http://www.wolframalpha.com/input/?i=plot+y%3D%281%2B.1%2Fn%29^n+for+n+%3D+1..40%2C+y%3De^.1