If you place $100 in a bank account that pays 6% at the end of each year, and you leave your $100 and all your interest in the bank, how much will you have in the bank at the end of 7 years with annual compounding?
You can put your $100 in Bank A that pays 8% at the end of the year. You can also put your $100 in Bank B that pays 4% at the end of six months and then 4% again at the end of the year. You will keep your $100 and all interest in the bank. At the end of the year