In "Saving Money Part $1"$ we saw an example of yearly $($or annual$)$ compounding $($interest was added to the principal every year$).$ However, investments can also compound semiannually, quarterly, monthly, and even daily! The following is a graph showing just that using a $$1,000$ investment at various compounding frequencies earning $20\%$ interest annually.

Which of the following compounding periods is the best deal for the investor: monthly, quarterly, or annual? Explain.

Which of the following compounding periods is the best deal for the borrower: monthly, quarterly, or annual? Explain.