Question

A bank offers a money market account paying 4.9% interest compounded semiannually. A competing bank offers a money market account paying 4.8% interest compounded daily. Which account is the better investment?

Answer 1

Assume $1000 at 4.9% semi-annually = $1,049.60
Assume $1000 at 4.8% daily = $1,049.17

Let's try a bigger number $50'000 4.9% semi-annually $52,480.01
$50,000 4.8% daily = $52,458.37
It's a wash, the question is how long will you be investing, that might make a difference. I calculated 12 Millions over 6 years and bank A would be the better choice. Semi-annual compounded at 4.9%