Sunday, May 26, 2024
Household Math™: Compounded Daily vs. Monthly
by Scott Bilker

 Scott Bilker is the author of the best-selling books, Talk Your Way Out of Credit Card Debt, Credit Card and Debt Management, and How to be more Credit Card and Debt Smart. He's also the founder of DebtSmart.com. More about Scott Bilker and DebtSmart can be found in the online media kit.

Test your knowledge by trying to solve this DebtSmart, Household Math™ problem! After you complete the problem, you’ll get the solution and explanation.

 1 You have \$10,000 that you want to deposit in a money market account. You have a choice between two accounts. Both accounts pay 5% APR (Annual Percentage Rate). One account is compounded daily, meaning that interest is paid daily to the account. The other is compounded monthly meaning that interest is paid monthly. After one year, how much more is earned by depositing the money in the account that is compounded daily?
 \$1.05 \$10.05 \$100.05 \$1,000.05 I don't know!

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