Question

Which is better investment 8%,compounded half-yearly or 7.9% compounded monthly​

Answer 1

Given: Investment 7.9% compounded monthly and 8% compounded half-yearly.

To find: Which is the better investment?

Solution:

• Now we have given 8% compounded half-yearly and 7.9% compounded monthly.

• Lets calculate amount received after 6 months as a common interval.

• So for 7.9% compounded monthly, we have:

               Amount = P (1  + 7.9/1200)^6

                              = P(1200 + 7.9 / 1200)^6

                              = P (1207.9/1200)^6

                              = 1.0401P  

• Now for 8% compounded half-yearly, we have:

               Amount = P (1 + 4/100)  

                              = P (104/100)

                               =  1.04P

• From above calculations, the amount received in investment at the rate of 7.9% is slightly more.

Answer:

•                 So the investment at 7.9% is quite better than at 8%.