If an 8% annual interest rate is compounded quarterly, the rate per quarter is 8/4 = 2%.

So an amount **$100**, in a year would become $100*( 1 + .02)^4

=> $100* 1.02^4

=> $100* 1.0824

=> $108.24

If the compounding is done annually the amount would increase by 8% or become $100*(1 + .08)

=> $108.

So, there is a difference of 24 cents in the two cases.

**Even if we take the notional annual interest rate to be the same, as the period of compounding decreases (3 months instead of 12 months), the amount compounded increases after a year.**

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