Question

A man deposits $3 000 annually to accumulate at 9% p.a. compound interest. How much will he have to his
credit at the end of 25 years?
Compare this to depositing $750 every three months for the same length of time and at the same rate. Which
of these two options gives the better return?

Answer 1

Step-by-step explanation:

APR – ANNUAL PERCENTAGE RATE

Interest rates are usually given as an annual percentage rate (APR) – the total interest that will be paid in the year. If the interest is paid in smaller time increments, the APR will be divided up.

For example, a 6% APR paid monthly would be divided into twelve 0.5% payments.

6

÷

12

=

0.5

A 4% annual rate paid quarterly would be divided into four 1% payments.

4

÷

4

=

1