Bank D offers a CD that pays 3.26% p.a., with semiannual compounding. Bank E off

Question

Bank D offers a CD that pays 3.26% p.a., with semiannual compounding. Bank E offers a CD that
pays 3.24% p.a., with monthly compounding. Bank F offers a CD that pays 3.22% p.a., with daily
compounding. And, Bank G offers a CD that pays 3.20% p.a., with continuous compounding. If an
investor deposited $10,000 today into each of these four different bank CD accounts, what would be
the difference (to the nearest cent) between the amount of money in the account with the greatest
future value and the account with the smallest future value exactly 35 years from today?

Explanation / Answer

Bank D: 10,000(1+ .0326/2)^(2*35) = 31,012.36 Bank E: 10,000(1+ .0324/12)^(12*35) = 31,033.18 Bank F: 10,000(1+ .0322/365)^(365*35) = 30,862.30 Bank G: 10,000*e^(.032*35) = 30,648.54 The difference would be 31,033.18 - 30,648.54 = 384.64

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