Question

Anthony is deciding between different savings accounts at his bank. He has four options, based on how frequently interest compounds. Which should he choose if he wants the best rate of return on his interest?

Answer 1

fixed account he should deposit

Answer 2

Let X be  the number of compoundings per year. e.g. Monthly = 12.

Daily = 251 / 360/ 365.

APR is divided by X from above and paid per compounding.

So if X is 12, and APR is 3%, then monthly 0.25% .

If you have $1000 deposited, in one month, you’ll earn $2.50 ($1000 * 0.0025). Month 0: $1000.

Month 1: $1002.50. Month 2: (1002.5 * 1.0025): $1005.00625.