Question

Please Help ASAP??
Ashley is comparing three investment accounts offering different rates.

Option A: APR of 4.95% compounding monthly
Option B: APR of 4.85% compounding quarterly
Option C: APR of 4.895% compounding daily

She would like to earn at least a 5% annual yield. Which account(s) will give Alexandra the yield she wants?

Options A and B only

Option B only

Options A and C only

Option C only

Answer 1

What's your plan?

Option A \(\left(1 + \dfrac{0.0495}{12}\right)^{12}\)

Calculate that and then do the other two.

Answer 2

i don't understand

Answer 3

That's tricky, since you cannot solve the problem. Why do you have this problem if you have not been introduced to the material? Very odd.

Anyway...

You are given APR. This is a Nominal Interest Rate which, when combined with the frequency of compounding, can be used to calculate the Effective Interest Rate. I have demonstrated how to do this for monthly compounding. (Subtract 1 from what I wrote for the actual effective interest rate). Your task is to do the arithmetic I set up for you and then repeat the exercise for the other two.

Go!