You have $800 that you would like to invest. You have 2 choices: Savings account

Question

You have $800 that you would like to invest. You have 2 choices: Savings account A, which earns 8% compounded annually or savings account B, which earns 7.70% compounded monthly. Which would you choose and why? Answer A, because it has a higher effective annual rate. , because the future value in one year is lower. B, because it has a higher effective annual rate. B, because the future value in one year is lower. A, because it has the higher quoted rate. You have $800 that you would like to invest. You have 2 choices: Savings account A, which earns 8% compounded annually or savings account B, which earns 7.70% compounded monthly. Which would you choose and why? You have $800 that you would like to invest. You have 2 choices: Savings account A, which earns 8% compounded annually or savings account B, which earns 7.70% compounded monthly. Which would you choose and why? A, because it has a higher effective annual rate. , because the future value in one year is lower. B, because it has a higher effective annual rate. B, because the future value in one year is lower. A, because it has the higher quoted rate. A, because it has a higher effective annual rate. , because the future value in one year is lower. B, because it has a higher effective annual rate. B, because the future value in one year is lower. A, because it has the higher quoted rate.

Explanation / Answer

A, because it has a higher effective annual rate.

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