Periodic interest rates. you have a savings account in which you leave the funds for one year without adding to or withdrawing from the account. which would you rather have: a daily compounded rate of 0.040%, a weekly compounded rate of 0.285%, a monthly compounded rate of 1.35%, a quarterly compounded rater of 3.50%, a semiannually compounded rate of 8.5%, or an annually compounded rate of 18%? what is the effective annual rate (ear) of a daily compounded rate of 0.040%?

We will pick the highest rate, which is 18% annually

effective rate of 0.04% compounded daily: 15.72%

Explanation:

we will calculate the equivalent rate for each alternative:

daily:   0.040%

time365.00 (365 days per year)

rate      0.040% = 0.04/100 =   0.00040

effective: 0.1572 = 15.72%

weekly 0.285

there are 52 week per year

effective rate: 0.15950 = 15.95%

monthly 1.35%

12 months per year

effective rate =0.17459 = 17.46%

quarterly: 3.5%

four quarter per year

effective rate = 0.14752 = 14.75%

semiannually 8.5%

dos half

effective rate = 0.17723 = 17.72%

annual of 18%

We will pick the highest rate, which is 18% annually

answer; ///retained

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