Answer to Question #111504 in Economics of Enterprise for Paige Connor

Question

(c) If a Commercial Bank A offers its savers 10.3% annual interest rate and pays interest annually, while another Commercial Bank B offers its savers 10% annual interest rate but pays monthly. Which Commercial Bank you would deposit your money, if you intended to keep in the savings account for 5 years. Show all numerical calculations

Answer 1

If we deposit 1000

1000*((1+0,103)^5) = 1632.59

1000*((1+0,10/12)^60 = 1645.25

I would prefer Bank B