Answer to Question #103513 in Financial Math for Salmah

Question

Which options that earns a higher interest?
Option 1: a person invested $4000, he is offered an interest of 5,7 (compunded monthly) for two years.

Option 2: a person invested $4000, he is offered an interest of 5,9(compunded annually) for two years.

Answer 1

Option 1: $A=4000(1+\frac{0.057}{12})^{2*12}=4481.80.$

Option 2: $A=4000(1+0.059)^2=4485.92.$

Option 2 earns a higher interest.