Assume You Have a Choice Between Two Deposit Accounts

question 159

Essay

Assume you have a choice between two deposit accounts. Account X has an annual percentage rate of 12.25 percent but with interest compounded monthly. Account Y has an annual percentage rate of 12.20 percent with interest compounded continuously. Which account provides the highest effective annual return?

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Definitions:

Accord And Satisfaction

A legal contract where a dispute is settled by the parties involved agreeing to give and accept something of value in resolution, significantly altering the original contract's terms.

Unilateral Contract

A contract in which one party promises to perform a specific action in return for a performance, not a promise, by the other party.

Consideration

Consideration in contract law refers to something of value exchanged between parties as part of an agreement.

Illusory Promise

A statement that appears to be a promise but does not actually bind the party to any obligation, making it unenforceable as a contract.