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Interest rate alternatives

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12 Assuming you will leave your money in the bank for the entire year, which of the following interest rate alternatives would you prefer?
a. 11.75 % compounded semi-annually
b. 11.75 % compounded quarterly
c. 11.45 % compounded weekly
d. 11.45 % compounded annually
e. None of the above or insufficient information

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Solution Preview

We would prefer the alternative that has the highest effective annual rate (EAR)
a. 11.75 % compounded ...

Solution Summary

The solution explains the correct option in relation to interest rate alternatives

$2.19