Answer to Question #348979 in Financial Math for Nalyn

Question

4. Which has the higher annual yield, 6% compounded quarterly or 6.25% compounded semiannually?

Answer 1

$$A=P(1+r/n)^{nt}$$

6% compounded quarterly

$$A=P(1+0.06/4)^{4(1)}=1.061364P$$

6.25% compounded semiannually

$$A=P(1+0.0625/2)^{2(1)}=1.063477P$$

6.25% compounded semiannually has the higher annual yield.