Question

# (Please show step by step workings) Mary’s parents tell them that they will set up a savings account for their

first grandchild. They have $15,000 to invest. They have found two options: a bank account that pays 3.25 % interest compounded semi-annually, and a bank account that pays 3 % interest compounded monthly

a. Which option will result in the largest future value of the investment at the end of ten years if they invest $15000 and they do not add any additional funds to that account.

b. Which option will result in the largest amount of interest at the end of ten years if they invest $10000 and they do not add any additional funds to that account?

Principal Amount = 5 15,000

Case 1:

Rate of interest 3.25% semi—annually, and the time is 10 yea rs. The compounded amount will be 325 2×10

‘ 1625 2

=$15,000x 1+; =$15,CIOCIgt;lt; 1+’—…

Math