Abank offers a money market account paying 8.7% interest compounded annually. a competing bank offers a money market account paying 8.5% interest compounded daily. (assume 360 days in a year.) which account is the better investment?

The answer is 8.5% interest compounded daily.

EXPLANATION

Regardless of your rate, the more often interest is paid, the more beneficial the effects of compound interest.

A daily interest account, which has 360 compounding periods a year, in this case, will generate more money than an account with an annual compounding, which has one compounding period per year.

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