That's so TRUE, @ALAN. Me too!! 

Answer by math_tutor2020(3817)   (Show Source): You can put this solution on YOUR website!
 

The compound interest formula is

A = P*(1+r/n)^(n*t)





Let's say we have P = 100 dollars to deposit and we do so over t = 1 year.





The first scenario has r = 0.04 and n = 2

A = P*(1+r/n)^(n*t)

A = 100*(1+0.04/2)^(2*1)

A = 104.04





The second scenario involves r = 0.05 and r = 12

A = P*(1+r/n)^(n*t)

A = 100*(1+0.05/12)^(12*1)

A = 105.116189788173

A = 105.12





The second scenario is better.

 

Answer by ikleyn(52790)   (Show Source): You can put this solution on YOUR website!
 .





To answer this question, calculations are not necessary.





The second bank has higher nominal annual percent rate and makes compounding more often.





These are two reasons/(two factors) what both work in the same direction, providing more high actual percentage rate



of the second bank comparing to the first bank.







 

RELATED QUESTIONS

One bank quotes interest at 4% p.a. compounded semi annually. Another bank offers... (answered by Theo)

Todd wants to start a business in 3 years. He figures that he will need $10 000 to start.  (answered by josgarithmetic)

1.) What rate (%) compounded quarterly is equivalent to 6% compounded semi-annually? 
a.  (answered by jim_thompson5910)

Question 1 (1 point)
 
A bank offers a four-year "Escalating Rate GIC" on which the... (answered by Theo)

Stewart invests 1200 GBP in a bank that offers interest at a rate of 2.8% compounded... (answered by ikleyn)

Two banks offer different investment packages.
BANK A:	6.5% p.a. compounded... (answered by solver91311)

The Happy Savings Bank offers a nominal interest rate of 6% compounded quarterly, whereas  (answered by LinnW)

If 5000 dollars is invested in a bank account at an interest rate of 4 per cent per year,  (answered by stanbon)

A bank offers 2% interest compounded annually. How much will $200000 worth after 10... (answered by Alan3354)