question archive You have the choice of three accounts
You have the choice of three accounts
Subject:FinancePrice:2.86 Bought22
You have the choice of three accounts. In which of the following would you prefer to invest?
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Select one:
a. Account C paying a 9% return compounded daily
b. Account A paying a 9.15% return compounded semi-annually
c. Account B paying a 9.05% return compounded quarterly
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EAR=[(1+APR/m)^m]-1
where m=compounding periods
EAR for:
C=[(1+0.09/365)^365]-1
=9.416%(Approx)
A=[(1+0.0915/2)^2]-1
=9.359%(Approx)
B=[(1+0.0905/4)^4]-1
=9.362%(Approx)
Hence Account C is preferred having highest EAR
