# 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.

Question
66 views

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.

check_circle

Step 1

Formula of amount when compound interest is considered is

Step 2

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

Step 3

b)  When compounded quarterly

Rate of interest = 5.9% annually

= (5.9/4)% quarterly

&...

### Want to see the full answer?

See Solution

#### Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

### Calculus 