Calculate the highest effective rate of interest & explain
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You are interested in investing your money in a bank account. Which of the following banks provides you with the highest effective rate of interest and why?
a) Bank 1; 8% with monthly compounding
b) Bank 2 ;8% with annual compounding
c) Bank 3 ;8% with quaterly compounding
d) Bank 4; 8% with daily compounding
e) Bank 5; 7.8% with annual compounding
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The solution calculate the highest effective rate of interest and explain why.
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