Question

The savings account offering which of these APRs and compounding periods

offers the best APY?


A. 4.0784% compounded monthly

B. 4.0792% compounded quarterly

C. 4.0730% compounded daily

D. 4.0798% compounded semiannually

Answer 1

The answer is "Option C"

Explanation:

The using formula
`= (1+(r)/(n))^n -1`

→r = rate

→ n = compounded value

In choice a:

When compounded is monthly
`4.0784\%`

`n = 12`

`\to (1+ (0.040784)/(12))^(12) = 1.0403-1 = 0.0403`

In choice b:

When compounded is quarterly
`4.0792\%`

`n = 3\\\\\to (1+ (0.040792)/(12) )^(3) = 1.0102-1 = .0102`

In choice c:

Whenn compounded is daily
`4.0730 \%`

`n = 365\\\\\to (1+ (0.040730)/(12))^(365) = 3.328-1 = 2.328`

In choice d:

When compounded is semiannually
`4.0798\%`

`n = 2\\\\\to (1+ (0.040798)/(12))^(2) = 1.0066-1 = 0.0066`