Chapter 5, Problem 4Q

### Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

Chapter
Section

### Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

# Would you rather have a savings account that pays 5% interest compounded semiannually or one that pays 5% interest compounded daily? Explain.

Summary Introduction

To explain: The reason to choose between an alternative from a savings account with interest compounded semi-annually or a savings account with compounded daily interest.

Introduction:

Compound Interest: The compound interest refers to the accumulated interest which is paid out for a given sum. To calculate the compound interest, the interest for a year is again added in the principal amount and hence the accumulated interest is given after the time period. So, the compound interest is called as interest on interest.

Explanation
• The calculation of interest on a given sum is done on many basis.
• The interest can be calculated on annually, semi-annually, quarterly and daily basis...

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