Which savings account pays interest at higher effective rate

Reference no: EM131003085

Assuming all $3000 is deposited at the year's beginning or end is about 6 months different from assuming $250 is deposited each month. Thus, the value in Example 2.7, which corresponds to the reality of the cash ?ows, is about halfway between the two values calculated for an accurate interest rate but a less accurate cash ?ow pattern. An effective interest rate does not correct for annual vs. monthly cash ?ows.

Which savings account pays interest at a higher effective rate? New York Savings (NYS) compounds interest daily at a nominal rate of 5 1 %. Montana Sky Bank (MSB) compounds interest annually at a nominal rate of 53 %.

Reference no: EM131003085

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