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What is the effective rate of interest

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Question - Harry has $100,000 and decided to invest it efficiently. The Best Bank is offering a 1-year term deposit which pays a simple annual rate of interest of 4%. Interest is compounded fortnightly.

a) What is the effective rate of interest?

b) How much will Harry have in his account at the end of 1 year assuming he makes no withdrawals?

c) All other things being equal, should Harry deposit his money into the Best Bank or lend Michael for 4.05% per year, compounded monthly?

Reference no: EM133118150

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