Sub: Finance Topic: Finance Basics
At various interests compounding intervals select the best option.
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1. You have $10,000 to invest. You do not want to take any risk, so you will put
the funds in a savings account at the local bank. Of the following choices,
which one will produce the largest sum at the end of 22 years?
a. An account that compounds interest annually.
b. An account that compounds interest daily.
c. An account that compounds interest quarterly.
d. An account that compounds interest monthly.
Amount to be invested (a) $10,000
Number of years (n) 22
Annual rate of interest (Assumed) (r) 10%
Future value if compounded daily (a X (1 + r/365)365n)