Jane is having difficulty deciding whether to put her savings in the Mystic Bank or in the Four Rivers Bank. Mystic offers a 12% rate compounded quarterly, and Four Rivers offers 14% compounded semiannually. Jane has $40,000 to invest and expects to withdraw the money at the end of five years. The best deal is:
A) Four Rivers
B) Four Rivers for first two years
C) Mystic
D) Mystic for last two years
E) None of these

Question

Quizplus · Accepted Answer

Four Rivers Bank offers a higher effective annual rate due to its 14% semiannual compounding, resulting in a greater return over five years compared to Mystic Bank's 12% quarterly compounding.

Jane Is Having Difficulty Deciding Whether to Put Her Savings