Anthony should choose daily compounding if he wants the best rate of return on his interest. This implies the correct answer is D.
Daily compounding also means daily compounding of interest. In other words, it implies an interest is added to a deposit on a daily basis.
Further Explanation
The concept behind daily compounding of interest is that Anthony would not only earn interest on his original deposit but he will also earn interest on the previous interest payment
For example, let assume that Anthony begins with $300 and earns 2% interest of his original sum. What it means is that Anthony will end up having $302. His next earnings would be 2% of 302, which will give a total of $305.02 and so on depending on the length of terms (in days)
However, the daily compound interest can be calculated using the formula below:
A= (P (1+r/n) ^ (nt)) – P
Where:
- A is the daily compound rate
- P is the principal amount
- R is the rate of interest
- N is the time period
However, the higher the length of terms (in days), the higher the amount of the compound interest
Therefore, daily compounding will be a powerful tool for Anthony to achieve his financial goals because
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KEYWORDS:
- interest rate
- daily compounding
- savings account
- interest compounds
- best rate
- anthony
