Question

Claudia is considering opening a savings account. Two banks offered her the same interest but with different compounding rates. Fidelity Bank is offering to pay 6% interest compounded daily while Ecobank is offering the same rate compounded semiannually. Which account will pay more to her if she leaves a GHS1,000 deposit for one year?

Answer 1

Fidelity Bank:

$FV = 1,000×(1 + 0.06/365)^{365} = 1,061.83.$

Ecobank:

$FV = 1,000×(1 + 0.06/2)^2 = 1,060.9.$

So, Fidelity bank will pay more.