Question

Audrey is comparing three investment accounts offering different rates.

Option A: APR of 9.45% compounding monthly

Option B: APR of 9.56% compounding quarterly

Option C: APR of 9.569% compounding daily

She would like to earn at least a 10% annual yield.

Which account(s) will give Alexandra the yield she wants? (3 points)

a. Options A and B only

b. Option B only

c. Options A and Conly

d. Option Conly

Answer 1

Option C is the only option that yields more than 10% annually (10.04%)

Step-by-step explanation:

Option A's monthly interest = 9.45% / 12 = 0.7875%

option A's annual yield = (1 + 0.7875%)¹² - 1 = 9.87%

Option B's quarterly interest = 9.56% / 4 = 2.39%

option B's annual yield = (1 + 2.39%)⁴ - 1 = 9.9%

Option C's daily interest = 9.569% / 365 = 0.02621644%

option C's annual yield = (1 + 0.02621644%)³⁶⁵ - 1 = 10.04%