which is better investment 8% compounded half-yearly or 7.9% compounded monthly?
Answers
Given:
Investment 7.9% compounded monthly and 8% compounded half-yearly.
To find:
Better investment.
Solution:
To differentiate find the amount received after a fixed time interval so we will calculate the amount received after 6 months.
1) The amount received after the six months in the investment of 7.9% compounded monthly is given by:
- Amt = P (1 + 7.9/1200)⁶
- = 1.0401P
2) And the amount received after the six months in the second case that is an investment at 8% compounded half-yearly is given by:
- Amt = P (1 + 4/100)
- = 1.04P
So the amount received in investment at the rate of 7.9% is slightly more.
Investment at 7.9% is quite better than at 8%
Given : investment 8% compounded half-yearly or 7.9% compounded
monthly
To find : Which is better investment
Solution:
Let say Investment = P
A = P(1 + R/100)ⁿ
More the Amount for Same amount & same period , better the investment
8 % is Compounded Half yearly
=> 4 % interest rate for 6 month
Amount after 6 months would be
P (1 + 4/100) = 1.04P
7.9% compounded monthly
=> Monthly interest rate = (7.9/12) %
Amount after 6 months would be
= P (1 + 7.9/1200)⁶
= 1.0401P
1.04015P is Slightly more than 1.04P
Hence 7.9% compounded monthly is Slightly better than 8% compounded half-yearly
But Difference is very less so we can even Say that both are almost equivalent
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