Assuming  all  $3000  is  deposited  at  the  year's  beginning  or  end  is  about  6 months different from assuming $250 is deposited each month. Thus, the value in Example 2.7, which        corresponds to the reality of the cash ?ows, is about halfway between the two values calculated for an      accurate  interest rate but a less accurate cash ?ow pattern. An effective interest rate does not correct for annual vs. monthly cash ?ows.
Which  savings  account  pays  interest  at  a  higher  effective  rate?  New  York  Savings  (NYS)         compounds                interest  daily  at  a  nominal  rate  of  5 1 %.  Montana  Sky  Bank  (MSB)  compounds interest annually at a nominal rate of 53 %.