Quantitative Reasoning

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  • #30087

    Ezra Halleck
    Participant

    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).

    #30203

    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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