Question

A bank offers a money market account paying 8.7​% interest compounded annually. A competing bank offers a money market account paying 8.5​% interest compounded daily.​ (Assume 360 days in a​ year.) Which account is the better​ investment?

Answer 1

The answer is 8.5% interest compounded daily.

Step-by-step explanation

Regardless of your rate, the more often interest is paid, the more beneficial the effects of compound interest.

A daily interest account, which has 360 compounding periods a year, in this case, will generate more money than an account with an annual compounding, which has one compounding period per year.