Suppose you invest $1,000 in each of two institutions for a full year. Both pay 5% interest, but the first compounds quarterly and the second compounds annually. What would be the difference in the interest gained between the two institutions?
The technical answer here would be the same since no time element was specified. However, the formula for one year annually would be $1,000 x 1.05^1 and quarterly would be $1,000 x (1 + .05/4)^4.....
