Solve the problem.
A bank gives you two options to choose from for your investments:
Option A: 6% annual interest rate compounded yearly; and
Option B: 5.9% annual interest rate compounded quarterly.
Which of the two options is the better investment at the end of the 2 years.
Formula of amount when compound interest is considered is
Lets check amount after two years for both option when $100 invested.
a) When compounded annually
Rate of interest = 6%
Principal = $100
Number of times interest calculated = Once in a year, so twice in 2 years that is n = 2
b) When compounded quarterly
Rate of interest = 5.9% annually
= (5.9/4)% quarterly
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