Question

Three financial institutions, A,B,C, are offering different rates on a loan. Is a offer 3.15 % annual compounded monthly, B offers 2.25% compounded quarterly, C offers 2.05% compounded daily. Determine which of the institutions offers best deal. Explain and make a conclusion.

Answer 1

Explanation:

Given that interest rates are as follows:

Let P be 100 dollars for each.

A) 3.15% compounded monthly.

Hence amount =
`100(1+(3.15)/(1200) )^(12)`

Final amount = 103.20 dollars

B) 2.25% compounded quarterly

Final amt. =
`100(1+(2.25)/(400) )^4`

=102.27

C) 2.05% compounded daily

Amount =
`100(1+(2.05)/(36500) )^(365)`

=102.07

Obviously A is the best deal.