Which account has the highest effective annual interest rate? not necessary but show how you got your answer. a. account 1: interest is compounded quarterly at an annual rate of 4.20%.b. account 2: interest is compounded monthly at an annual rate of 4.15%.c. account 3: interest is compounded semiannually at an annual rate of 4.10%d. account 4: interest is compounded annually at a rate of 4.25%.

  A.  4.20% compounded quarterly

Step-by-step explanation:

The effective annual multiplier on an account with annual interest rate r compounded n times per year is ...

  (1 +r/n)^n

When doing multiple evaluations of the same expression, it is convenient to let a spreadsheet or calculator do them from a list of inputs. In the attached, we round the result to 4 decimal places to make comparison easier.

The highest effective rate is 4.2% compounded 4 times per year.

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Example calculation

  (1 +0.042/4)^4 = 1.0105^4 = 1.0426661426550625 ≈ 1.0427

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step-by-step explanation:

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