Question

You have $1,500 to invest. You have 2 choices: savings account A, which earns 8.75 percent compounded annually or savings account B, which earns 8.50 percent compounded monthly. Which account should you choose and why?

B; because the quoted rate is higher

A; because it has a higher effective annual rate

B; because it has a higher effective annual rate

A; because it has the higher stated rate

A; because it has the higher quoted rate

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

PV, FV, ANNUITY (Autosaved) - Microsoft Excel (Product Activation Failed) Review View Add-Ins File Home Insert Page Layout Formulas Data - 2x % Cut Calibri 11 A = = = V General A A Wrap Text Merge & Center B I U - D 8.9 E Copy Paste Format Painter Clipboard GH24 Insert Delete Format $ - % Number Conditional Format Formatting as Table Styles Cell Styles Σ AutoSum : A Fill Sort & Clear Filter Editing Find & Select Font Alignment Cells GE GF GG GH GL GJ 23 GD ACCOUNT A RATE = 24 25 EAR = 8.75% COMPOUNDED ANNUALLY (1+(APR/m))^m - 1 HERE m =1 EAR = EAR = (1+0.0875/1))^1 - 1 8.75% 29 31 32 ACCOUNTB RATE = 8.50% COMPOUNDED MONTHLY 33 34 EAR = (1+(APR/m))^m - 1 HERE m =12 EAR = EAR = (1+0.085/12))^12-1 8.84% 37 38 39 40 41 ANSWER: B; because it has a higher effective annual rate pv, fv, annuity CAP STRU VALUE profit margin_loan with points LOCK BOX DILUTION DOLLAR COST AVG EXPO LOAN OPTIONS ferences Rea NPER APR CPI ear FVA pva s2 30 00 120% 0 + 6. Bag ** OENG 28-10-2019