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Which do you prefer a bank account that pays 5 percent per year EAR for three years or an account that pays 2.5 percent every six months for three years?
Wiki User
∙ 12y ago
The latter of the two would be your better option, assuming the interest is properly compounded.
Consider. In the first case, your resulting payment would be:
P * 1.053 = P * 1.157625, or a total gain of just over 15.76%
In the second case, your resulting payment would be:
P * 1.0256 = P * 1 .159693418212890625, for a total gain of just over 15.96%
Wiki User
∙ 12y ago
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