Thinking Mathematically (6th Edition)

Published by Pearson
ISBN 10: 0321867327
ISBN 13: 978-0-32186-732-2

Chapter 8 - Personal Finance - 8.4 Compound Interest - Exercise Set 8.4: 63

Answer

The statement does not make sense.

Work Step by Step

The effective annual yield is the rate of simple interest which would earn the same amount of interest as the specified rate of compound interest. The effective annual yield is always higher than the specified rate of compound interest. If the rate of compound interest is 3.25%, then the effective annual yield will be higher than this rate. Therefore, the bank offering 3.25% compound interest must be a better investment than the bank offering 3.25% simple interest.
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