Marco wants to invest his savings in a bank for 3 years, he has £15000 to invest and receives offers from two banks , bank of peace 2.5 % per year and bank of trust 3.8% for first year 1% for each extra year , which bank should marco choose to get the most interest over the 3 year period
Answers
Given : Marco wants to invest his savings in a bank for 3 years, he has £15000 to invest and receives offers from two banks , bank of peace 2.5 % per year and bank of trust 3.8% for first year 1% for each extra year
To find : which bank should marco choose to get the most interest over the 3 year period
Solution:
Considering simple interest
SI = P R T /100
2.5 % per year will
= 15000 * 2.5 * 3 /100 = £ 1125
3.8% for first year 1% for each extra year
SI = 15000 * 3.8 * 1/100 + 15000 * 1 * 2/100 = £ 870
1125 > 870
2.5 % per year is better option
Considering compound interest
A = P(1 + R/100)ⁿ n = Times in years
2.5 % per year will
A = 15000(1 + 2.5/100)³ = £ 16,153.4
3.8% for first year 1% for each extra year
15000(1 + 3.8/100)(1 + 1/100)² = £ 15,883
16,153.4 > 15,883
Still 2.5 % per year is better option
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