In this video, we walk through a practical example of comparing two savings account offers: one from Bank A with a 3% interest rate compounded semi-annually, and another from Bank B offering 2.7% interest compounded daily. This exercise is aimed at helping finance students understand how to determine the better investment by focusing on the concept of the effective annual rate (EAR). The video emphasizes a step-by-step approach to solving this type of problem. First, the key information from the two offers is identified, including the different compounding methods. Then, the video demonstrates how to calculate the EAR for each option using basic formulas. For Bank A, with semi-annual compounding, we break down the interest rate into smaller periods, then calculate the EAR. For Bank B, with daily compounding, the same approach is used to determine its EAR. Finally, the video concludes by comparing the EARs of the two options to help you decide which bank is offering the better deal. By the end of the video, students will understand how to approach similar questions in exams, compare interest rates with different compounding frequencies, and determine the most beneficial savings option.