Question

The savings account offering which of these APRs and compounding periods offering the best APY?

A. 3.1196% Compounded Semiannually

B. 3.1172% Compounded Monthly

C. 3.1095% Compounded daily

D. 3.1184% compounded quarterly

Answer 1

Answer:
3.1172% Compounded Monthly

Explanation:
Got it right on the quiz.

Answer 2

Answer: 3.1172% Compounded Monthly

Explanation:

`Effective rate of return = ( 1 + r/n)^n - 1`

Option A: 3.1196% compounded semiannually.

where r = 3.1196% or 0.031196

n = 2

`Effective Rate of return = (1 + 0.031196/2)^2 - 1`

OPTION A : Effective Rate of return = 3.144%

OPTION B: 3.1172% Compounded Monthly

where r = 3.1172% or 0.031172

n = 12

`Effective Rate of return = (1 + 0.031172/12)^12 - 1`

OPTION B: Effective Rate of return = 3.162%

OPTION C: 3.1095% Compounded Daily

where r = 3.1095% or 0.031095

n = 365

`Effective Rate of return = (1 + 0.031172/365)^365 - 1`

OPTION C :Effective Rate of return = 3.158%

OPTION D: 3.1184% Compounded Quarterly

where r = 3.1184% or 0.031184

n = 4

`Effective Rate of return = (1 + 0.031184/4)^4 - 1`

OPTION D :Effective Rate of return = 3.155%

Therefore, OPTION B provides 3.162% the highest APY as compared to the other options.