Answer: Quarterly
Explanation:
Annual interest rate = 4.00%
Effective annual rate = 4.08%
To know if the bank is compounding interest daily or quarterly goes thus:
Effective Annual rate can be calculated using:
= (1+Periodic rate)^number of compounding periods - 1
Therefore, we calculate the daily compounding effective annual rate which will be:
= (1+4%/365)^365 - 1
= (1 + 0.04365)^365 - 1
= 4.08%
For Quarterly EAR, this will be:
= (1+4%/4)^4 - 1
= (1 + 0.04/4)^4 - 1
= 4.06%
Therefore, the a bank is compounding interest Quarterly
