Ann Watson has $100,000 that she can deposit in any of three savings accounts for a 3-year period. Bank A compounds interest on an annual basis, bank B compounds interest twice each year, and bank C compounds interest each quarter. All three banks have a stated annual interest rate of 4 percent.

a) What amount would Ms. Watson have at the end of the third year-including interest?

b) What effective interest rate would she earn at each bank?

c) On the basis of your finding in a and b, which bank should Ms. Watson deal with? Why?