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Which APR and compounding period offer the best APY on a savings
account?
A. 2.501%, compounded daily
B. 2.502%, compounded monthly
C. 2.504%, compounded semiannually
OD. 2.503%, compounded quarterly

Verified Answer :

GinnyAnswer

To determine which APR and compounding period offer the best APY (Annual Percentage Yield) on a savings account, let's evaluate each option and identify the one with the highest APY.

1. Option A: 2.501% APR, compounded daily
- Daily compounding means the interest is applied 365 times per year.

2. Option B: 2.502% APR, compounded monthly
- Monthly compounding means the interest is applied 12 times per year.

3. Option C: 2.504% APR, compounded semiannually
- Semiannual compounding means the interest is applied 2 times per year.

4. Option D: 2.503% APR, compounded quarterly
- Quarterly compounding means the interest is applied 4 times per year.

After evaluating the Annual Percentage Yield (APY) for each option, we find the following values:

- Option A (2.501%, daily): Approx. 2.5324%
- Option B (2.502%, monthly): Approx. 2.5309%
- Option C (2.504%, semiannually): Approx. 2.5197%
- Option D (2.503%, quarterly): Approx. 2.5266%

Among these calculated APYs, the highest value is approximately 2.5324%, which corresponds to Option A: 2.501% APR, compounded daily.

Therefore, the best choice, offering the highest APY, is:
Option A: 2.501%, compounded daily.

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