Which interest rate works out best for one year?

8.8% simple interest, credited and paid in one year

or

8.55% interest credited and and paid quarterly?

Would you believe that they will both give exactly the same interest at the end of the year?

The banks aren't in the business of giving too much money away.

Actually the second plan is slightly better. If you save 100 you will get 100*(1+0.088)= 108.8 according to the first alternative and 100*(1+0.0855/4)^4= 108.8281 in the quarterly plan assuming that you will save the interest at the end of each quarter.

Thanks for that. I think I will go with the 8.55% even though it makes you feel better to be getting 8.8%. The quarterly income is nice.

Thanks

It's not as simple as that. Is the 8.55% guaranteed for 1 year ? Probably not. Probably it is subject to change every quarter. So after this Q you might get only 8% (for example_ which will affect the 1 year equivalent rate a lot. On the other hand, rates might go up !

Also, with quartely interrest you have the option to switch currencies if that's what you want.

What curency is this ? NZD ? Rates may be on their way down.....