Question
You have $800 that you would like to invest. You have 2 choices: Savings account A, which earns 8% compounded annually or savings account B, which earns 7.70% compounded monthly. Which would you choose and why? Answer
A, because it has a higher effective annual rate. , because the future value in one year is lower. B, because it has a higher effective annual rate. B, because the future value in one year is lower. A, because it has the higher quoted rate. You have $800 that you would like to invest. You have 2 choices: Savings account A, which earns 8% compounded annually or savings account B, which earns 7.70% compounded monthly. Which would you choose and why? You have $800 that you would like to invest. You have 2 choices: Savings account A, which earns 8% compounded annually or savings account B, which earns 7.70% compounded monthly. Which would you choose and why? A, because it has a higher effective annual rate. , because the future value in one year is lower. B, because it has a higher effective annual rate. B, because the future value in one year is lower. A, because it has the higher quoted rate. A, because it has a higher effective annual rate. , because the future value in one year is lower. B, because it has a higher effective annual rate. B, because the future value in one year is lower. A, because it has the higher quoted rate.
Explanation / Answer
A, because it has a higher effective annual rate.