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Discuss whether peter advice was correct

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Question - Peter has invested hi annual bonus in a one year fixed deposit at Alpha Bank which offers a nominal interest rate of 12% per annum compounded bi-annually.

However, at a braai over the weekend, Frans his friend has pointed out that he should have rather invested at the same bank he is a client of, namely Beta Bank, because even though the nominal interest rate is half a percent less than Alpha Bank, the interest is compounded quarterly, and he will therefore get a greater return that Peter.

Required - Discuss whether Peter's advice was correct. Provide calculations to support the answer.

Reference no: EM133168249

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