Discussion:
Interest rates
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Laurence
2008-10-26 14:50:29 UTC
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Could someone tell me which produces the highest return?

6.1% compounded monthly or
8% compounded annually.
Laurence
Barb Knox
2008-10-26 20:23:18 UTC
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Post by Laurence
Could someone tell me which produces the highest return?
6.1% compounded monthly or
8% compounded annually.
The latter (assuming that the 6.1% is the per-month rate * 12, i.e. the
"APR" in monthly-payment jargon).

The annual rate for an APR R compounded monthly is:
((1 + R/100/12)^12 - 1)*100

So an APR of 6.1 percent represents a true annual rate of about 6.27
percent.
Post by Laurence
Laurence
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Ken Pledger
2008-10-26 20:20:07 UTC
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Post by Laurence
Could someone tell me which produces the highest return?
6.1% compounded monthly or
8% compounded annually.
Laurence
(1 + (0.061)/12)^12 = 1.0627...

so the first alternative amounts to roughly 6.3 % per annum. You'd
definitely do better to go for the second.

Ken Pledger.

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