You plan to deposit $5,500 into a savings account. There are five great banks in your...

You plan to deposit $5,500 into a savings account. There are five great banks in your town offering terrific interest rates. If your goal is to earn the greatest amount of interest, which bank should you choose? Please explain why.

Bank KLM: 3.66% compounded continuously

Bank HIJ: 3.71% compounded semi-annually

Bank DEF: 3.70%, compounded monthly

Bank XYZ; 3.64% compounded quarterly

Bank ABC: 3.74%, compounded annually

Expert Solution

Particulars	Bank KLM	Bank HIJ	Bank DEF	Bank XYZ	Bank ABC
Amount of deposit	5,500	5,500	5,500	5,500	5,500
× future value factor	1.03728	1.03744	1.03763	1.03690	1.03740
Future value	5,705.03	5,705.94	5,706.99	5,702.95	5,705.70
Less: deposit	(5,500)	(5,500)	(5,500)	(5,500)	(5,500)
Interest earned	205.03	205.94	206.99	202.95	205.70

Bank DEF provides highest interest.

jeff jeffy answered 1 year ago

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