the same amount of principal is invested in d...
the same amount of principal is invested in different accounts earning the same interest rate. which of the following accounts would have the greatest accumulated value at the end of one year? a. an account earning no interest b. an account earning simple interest c. an account earning interest compounded annually d. an account earning interest compounded daily please select the best answer from the choices provided a b c d
Answer
# Explanation:
## Step1: Recall interest - accumulation formulas
Let the principal be $P$, the annual interest rate be $r$.
For an account earning no interest, the accumulated value $A_1 = P$.
For simple - interest, the formula is $A_2=P(1 + r)$ (where the time $t = 1$ year).
For annual compounding, the formula is $A_3=P(1 + r)$ (since $n = 1$ compounding period in a year, and the compound - interest formula is $A=P(1+\frac{r}{n})^{nt}$, with $t = 1$ and $n = 1$).
For daily compounding, $n = 365$ (assuming a non - leap year), and $A_4=P(1+\frac{r}{365})^{365}$.
## Step2: Compare the values
We know that the function $y=(1+\frac{r}{n})^{n}$ is an increasing function of $n$ for positive $r$. As $n$ increases from $1$ (annual compounding) to $365$ (daily compounding), the value of $(1+\frac{r}{n})^{n}$ increases. Also, $P(1 + r)<P(1+\frac{r}{365})^{365}$ for $r>0$. And $P$ (no - interest account) and $P(1 + r)$ (simple - interest and annual - compounding) are less than $P(1+\frac{r}{365})^{365}$.
# Answer:
D. An account earning interest compounded daily