Question

The same amount of principal is invested in different accounts earning the same interest rate.

Which of the following accounts would have the greatest accumulated value at the end of one year?
A.An account eaming no interest
B.An account eaming simple interest
C.An account eaming interest compounded annually
D.An account earming interest compounded daily ​

Answer 1

D.An account earming interest compounded daily ​

Explanation:

An account earning interest compounded daily would have accumulated the greatest value at the end of the year.

• Compound interest is interest on interest. In compound interest, the interest is calculated on the principal and interest accrued. This makes the value highest.
• For the account compounded daily, the interest on interest is taken every day. It has a power of 365.
• For compound interest accrued annually, the interest compounded yearly.
• Simple interest is basically on the principal.