Question

Suppose you were considering depositing money in a savings account at two different banks. Each bank will pay 5% interest. However, bank A compounds annually and bank B compounds semiannually. Provide a detailed explanation with your investment amount, period of time and your resulting investment. In addition, provide details on how you calculated using Excel (with formula) or financial calculator inputs. Which bank would you choose and why? Be sure to cite your source(s).

Answer 1

The answer and procedures of the exercise are attached in a microsoft excel document.

Explanation

Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.

Bank-B is better to invest because it has higher Future value due to higher effective annual interest rate.