Question

You have two investment options, i.e., 9% per year compounded quarterly or 9.2% per year simple interest. Which investment option would you select and why?​

Answer 1

Step-by-step explanation:

9% compounded quarterly

The initial investment is increased by 9% every 3 months and it is more than 9% simple interest per year

Answer 2

Answer:

The compound interest is more than simple interest, first investment option must be choosen.

Step-by-step explanation:

• The compound interest and simple interest have the different interst at the end of the time period.
• Let the Principal is 100 and time period 2 years

Step 1 of 2: Compound interest

• rate of interest 9% per year.thus rate per 3 months is 2.25%
• time in terms of 3 months =2 x 4=8
• Amount is given by

       $A=P(1+\frac{r}{100})^n\\ A=100(1+\frac{2.25}{100})^8\\A=100\times1.0225^8\\A=119.48$

• Interest =119.48-100=19.48

Step 2 of 2:Simple interest

• r=9.2%
• time=2
• Interest is given by

       $I=\frac{PRT}{100} \\I=100\times9.2\times2\\I=18.40$

Conclusion:

The compound interest is more than simple interest, first investment option must be choosen.