Respuesta :
Interest earned on first investment in year 1 is $6,183.13
Interest earned on second investment in year 1 is $6,167.68
Annual yield on first investment is 6.18%
Annual yield on second investment is 6.17%
What is daily compounding?
Daily compounding means that the interest on the investment is computed on daily basis, 365 days a year.
In a bid to determine the total interest earned in one year on the investment whose interest is compounded daily, we can make use of the future value below to determine its worth after 1 year, from which the initial investment can be deducted to determine the interest in year 1.
FV=PV*(1+r/n)^(n*t)
PV=initial investment=$100,000
r=rate of return=6%
n=365 days a year
t=1 year
FV=$100,000*(1+6%/365)^(365*1)
FV=$106,183.13
Interest=$106,183.13 -$100,000
interest=$6,183.13
Annual yield=effective annual interest
EAR=(1+6%/365)^(365)-1
EAR=6.18%
What is monthly compounding?
It means interest is compounded or computed every month, 12 months a year
FV=PV*(1+r/n)^(n*t)
PV=initial investment=$100,000
r=rate of return=6%
n=12 months a year
t=1 year
FV=$100,000*(1+6%/12)^(12*1)
FV=$ 106,167.78
Interest=$ 106,167.78 -$100,000
interest=$6,167.68
Annual yield=effective annual interest
EAR=(1+6%/12)^(12)-1
EAR=6.17%
Find out more about effective annual interest rate on:https://brainly.com/question/26498344
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