Solve the problem.
-A bank gives you two options to choose from for your investments:
Option A: $8 \%$ annual interest rate compounded yearly; and
Option B: $7.9 \%$ annual interest rate compounded quarterly.
Decide which is the better investment at the end of 2 years.
A)O ption A
B) Option B

Question

Quizplus · Accepted Answer

Option B is better because the effective annual rate (EAR) for Option B, compounded quarterly, is higher than the 8% compounded yearly. The EAR for Option B is approximately 8.13%, which is greater than 8%.

Solve the Problem 8%8 \%8% Annual Interest Rate Compounded Yearly; and Option B

Solve the Problem $8 \%$ Annual Interest Rate Compounded Yearly; and
Option B