Set 12: Exponential Functions (Intermediate)

Choice B is correct. Choice B is the correct answer. Compare the effective annual rates. 1. Option A: $A = P(1 + \frac{0.05}{4})^{4 \times 10} = P(1.0125)^{40} \approx 1.6436 P$. 2. Option B: $A = Pe^{0.049 \times 10} = Pe^{0.49} \approx 1.6323 P$. 3. Comparison: $1.6436> 1.6323$, so Option A is better. Strategic Tip: Higher nominal rate doesn't always win—compounding frequency matters. Choice A is incorrect because 5% quarterly actually beats 4.9% continuous. Choice C is incorrect because the results differ. Choice D is incorrect because we can calculate and compare.