Answer:
Let's say:
AM = current amount of money = 3000
APR = interest rate = 2.25
n = number of compounding periods
t = 5 years
Final amount of money:
FAM = AM x [1 + 2.25/n]^(n x 5) = 3000 x [1 + 2.25/n]^(n x 5)
Annual Compounding: FAM = 3000 x (1 + (2.25% / 1))^(1 x 5) = 3353.03
Quarterly Compounding: FAM = 3000 x (1 + (2.25% / 4))^(4 x 5) = 3356.16
Monthly Compounding: FAM = 3000 x (1 + (2.25% / 12))^(12 x 5) = 3356.86
Continuous Compounding: FAM = 3000 x 2.7183^(2.25% x 5) = 3357.22
=>Continuous Compounding gives largest benefit.
=> Option C is correct
Hope this helps!
:)
