Which interest rate and compounding period gives the better return? -8% compounded semianually - 7.85% compounded...

Which interest rate and compounding period gives the better return?

-8% compounded semianually

- 7.85% compounded continuosly

Expert Solution

compounding continuously with 7.85 interest rate will give you better return but very slight difference will be there between both case.

For example let's take t=10 years and P= 10,000 then compounding semiannually will give you 21911.23 whereas continuous compounding with 7.85 interest rate will give you 21924.07

Thus you can see difference is very less although continuous compounding will give you better retire.

If you still have any kind of problem then please ask me in the comment section. If you understand then please like it.

milcah answered 2 years ago

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