Rank each interest rate and compounding scheme in order from highest yield to lowest yield.
A) 6.5% compounded semi-annually, 6.5% compounded monthly, 6.5% compounded continuously
B) 6.5% compounded monthly, 6.5% compounded continuously, 6.5% compounded semi-annually
C) 6.5% compounded continuously, 6.5% compounded semi-annually, 6.5% compounded monthly
D) 6.5% compounded continuously, 6.5% compounded monthly, 6.5% compounded semi-annually
E) 6.5% compounded semi-annually, 6.5% compounded continuously, 6.5% compounded monthly

Question

Rank each interest rate and compounding scheme in order from highest yield to lowest yield. ​
A) 6.5% compounded semi-annually, 6.5% compounded monthly, 6.5% compounded continuously
B) 6.5% compounded monthly, 6.5% compounded continuously, 6.5% compounded semi-annually
C) 6.5% compounded continuously, 6.5% compounded semi-annually, 6.5% compounded monthly
D) 6.5% compounded continuously, 6.5% compounded monthly, 6.5% compounded semi-annually
E) 6.5% compounded semi-annually, 6.5% compounded continuously, 6.5% compounded monthly

Quizplus · Accepted Answer

The more frequently interest is compounded, the higher the yield will be. Continuous compounding yields the highest return, followed by monthly compounding, and then semi-annual compounding.

Rank Each Interest Rate and Compounding Scheme in Order from Highest