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What is the effective annual interest rate

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You have decided to start saving for an extended overseas trip in five years' time. If you put $800 per month into a savings account at ANZ earning 2.5% p.a. compounding monthly at the beginning of each month, how much will you have after five years?

How much interest will you have earned over the period?

What is the effective annual interest rate you will have earnt on your savings?

You realise you should check out the interest rates on offer at some other banks to see if you can get a better deal. You are disappointed to discover that they all have the same headline rate of 2.5%. However, the NAB rate is compounding daily, while the CBA rate is compounding semi-annually. Of the three savings accounts on offer, which should you choose and why?

Reference no: EM133072065

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