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1. If a bank offered you the following terms on a loan, which would be the BEST for the BANK and why? Explain in a sentence or two.A. Simple interestB. Compound interest yearlyC. Compound interest quarterlyD. Compound interest monthlyE. Compound interest daily

User Ferhrosa
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For a loan, simple interest makes the customer pay interest only for the amount of the loan.

Compound interest makes the customer pay interest for the loan balance at the end of each payment period. In other words, the customer pays interest over interest based on the remaining balance.

Of course, the best option for the bank is that the customer pays more often so the interest adds up more times for the loan duration.

The daily compound interest is the best choice for the bank because the loan recalculates every day, that is, 360 (or 365) times a year as compared to the monthly, quarterly, or yearly compound interest.

Answer: E. Compound interest daily

User Diego Woitasen
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