Question

Suppose Carla has $12,000 to invest. Which investment yields the greater return over 2 years: 9% compounded quarterly or 8.85% compounded monthly? Show your work.

Answer 1

$12,000 x 0.09= $1,080 per quarter
$1,080 x 4 quarters per year = $4320 per year
$4320 per year x 2 years = $8640

And:

$12,000 x 0.0885 (8.85%) = $1062.00 per month
$1062.00 x 12 months per year = $12, 744 per year
$12744 per year x 2 years = $25,488