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- PE2.12
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12) Determine the better investment: 6% compounded monthly or 6.2% compounded semiannually (to get full credit, you must find the effective annual rate for both).
lets say amount invested is $100 for a year
A=P(1+r/n)^nt
A=100(1+.06/12)^12(1) A=100(1+.062/2)^2(1)
A=106.1677 A=106.2961
A=106 A=106
When rounded both have the same outcome, however 6% compounded monthly seems to be the better option
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