Question

Savings account A and savings account B both offer APRs of 6%, but savings

account A compounds interest semiannually, while savings account B
compounds interest quarterly. Which savings account offers the higher APY?
O
A. Savings account B, because it has more compounding periods per
year
O
B. Savings account B, because it has fewer compounding periods
per year
C. Savings account A, because it has more compounding periods per
year
O
D. Savings account A, because it has fewer compounding periods
per year

Answer 1

A. Savings account B, because it has more compounding periods per year.

Example:

Interest semiannual

1,000×(1+0.06÷2)^(2)=1,060.9

interest quarterly

1,000×(1+0.06÷4)^(4)=1,061.36.

Compare between them and see which one is higher

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