SOLUTION: Would you rather have a saving account that pays 5% interest compound semiannually or one that pays 5% interest compound daily? Explain.

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Question 278143:
Would you rather have a saving account that pays 5% interest compound semiannually or one that pays 5% interest compound daily? Explain.
Answer by checkley77(12844) About Me  (Show Source):
You can put this solution on YOUR website!
Daily compounding pe^rt
100*2.7182^.05*1
100*1.05127=$105.13 amount of this investment after 1 year.
Semiannual compounding p(1+r/2)^2t
100(1+.05/2)^2*1
100^1.025^2
100*1.0506=$105.06 amount of this investment after 1 year.
Therefore the daily compounding makes an extra $.07 0n $100 dollars per year.