Corporate Finance: A Focused Approach (mindtap Course List)
Corporate Finance: A Focused Approach (mindtap Course List)
7th Edition
ISBN: 9781337909747
Author: Michael C. Ehrhardt, Eugene F. Brigham
Publisher: South-Western College Pub
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Chapter 4, Problem 5Q
Summary Introduction

To Discuss: Whether to have a savings account compounded semiannually or daily.

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Would you rather have a savings account that pays 5% interest compounded semiannually or one that pays interest compounded daily? Show in excel to understand the calculation
You want to open a savings account and you have 3 choices: 1) a saving account that pays interest of 7.2% compounded quarterly (In other words, it offers an APR=7.2%, compounded quarterly), 2) a saving account that pays interest of 6.8% compounded monthly, and 3) a saving account that pays interest of 7% continuously compounded?  Which one do you prefer?
If you deposit money today in an account that pays 4%annually interest. How long will it take to double your money?
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