Question 9.12 Max has $100,000 to invest. The ABC bank is offering a 1- year term deposits which pays simple annual interest of 8%. Interest is compounded monthly.

a)What is the effective rate of interest?

b)How much will Max have in his account at the end of one year, assuming he makes no withdrawals?

Max (from exercise 9.12) has decided to shop around for the best investment for his $100 000. The XYZ Bank is offering a 1 year term deposit which pays a simple annual rate of 8% interest is compounded weekly

(a)What is the effective rate of interest?

(b)How much will Max have in his account at the end of 1 year assuming he makes no withdrawals?

(c)All other things being equal, should Max deposit his money into the ABC Bank or the XYZ Bank?

(d)When depositing money into an interest bearing account does the investor prefer more or less frequent compounding?