Question: Chase Bank pays 6 % interest compounded annually on term deposit. Southern Bank pays 5 % interest, compounded quarterly. Green Bank, a newly listed firm,

Chase Bank pays 6% interest compounded annually on term deposit. Southern Bank pays 5% interest, compounded quarterly. Green Bank, a newly listed firm, offers its deposit customers 3.5% interest compounded monthly. a. Based on effective annual interest rates, in which bank would you prefer to deposit your money? b. Could your choice of bank be influenced by the fact that you might want to withdraw your funds during the year as opposed to the end of the year? (Assume that funds must be left on deposit during an entire compounding period for the interest to be earned).

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