Question

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

monthly?​

Answer 1

Answer:

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%