Question

Differnt finacial institutions,A, B, C are offering different rates on loans if A offers 3.15% annual interst compounded monthly B offers 2.25%compounded quarterly C offers 2.05% compounded daily. dertermine which insitiution offers best deals

Answer 1

Answer:3.15 %

Explanation:

Given

3.15 % compounded monthly

2.25 % quarterly

2.05 % daily

(a)A=P
`\left [ 1+(r)/(n)\right ]^(nt)`

A=P
`\left [ 1+(0.0315)/(12)\right ]^(12t)`

Suppose t= 1 year

A=1.031958 P

(b)A=
`\left [ 1+(r)/(n)\right ]^(nt)`

A=
`\left [ 1+(0.025)/(4)\right ]^(4t)`

A=1.022690 P

(iii)For 2.05 daily

A=
`\left [ 1+(0.0205)/(365)\right ]^(365t)`

For t=1 year

A=1.020709 P

thus Compound interest compounded monthly at 2.05% interest offers best deal as it sums up to least.