Question

You have $10,000 to invest for five years. You are offered with two investments.

• How much additional interest will you earn from the investment providing a 5% annual return compared to an investment of a 4% annual return?

• How much additional interest will you earn if the interests are compounded semi-annually for both investments?

Answer 1

Soutton As qiren, (P) Printawted= $10p00 (n) Number yeax (2) Rate ()2Compntation interest = 5 %. OROOS Ampunt When Rat ntere 57. Compourdad rm Numbu yean Prinu hal(P) x (+ Rat Amount(A) A P+) A $10000 (1t005) A 41000D x05) A l000o X276281562512 % 2-8/54 Amount CA) 2762 82 Prinupal P)1ld000 00 nterest 2762.82 (W Computahon nourt hen RatiInterot 4Comoundud P(tA) Alo00104 $1000D xDu A 2 10000 Xl2166 52 9029 A 12,166.529 A= $12,166,53 3

Amount (A 2-166.53 10000 0D Prinetpat(P) Pnereot 2.166.53 aCompntation Adddutora teret Pnterest an Pdoutfon merest ntergt Aldithioral Pndeaest $276282- 2l66.53 596.29 Addital rterest ef596.29. (b)M) Compntahon Aount When knrak Ratu 4 frteres 5 Y When Conmpourded emlammbat A = P x + }*2 A $I0000x C+5 $10000 025 Bloooo x2800 QYSUY2= $19600 045 AmountCA) S12800 0S Prinethall P) $10000.UD introt 20o-05 5A2 A 의3

>(b)(! Cambrtatim Amount Nhen mnra lata Interost 4 h ten compourdd Semlanmaty $l0000 x ( 1 +'09) S* A $10000 x (102) A $I0000 X .21899u41999-$1a9. 9 44 Amount A)12109.g4 Prtncpal P)10000.0D dtereta18 9,94 b() Commtan Addtioral Inteest Drterest as ber b) Adoutral ntereot Acddrtinal Pntereat aspu (b) $2uD. OS- $2109-9$6l0.9) "Tntereo Aeloal nteest 610.9 313