Answer to Question #271811 in Financial Math for Zai

Question

Jenny is planning to deposit 17,000.00 pesos Quezon Metropolitan Bank is offering 7.5% compounded semi-annually for 5 years while Quezon Premier Bank is offering 7% compounded monthly for 5 years. Wich bank should she deposit her money? Justify you answer by computing and comparing the maturity value for each bank.

Answer 1

Compound interest

$$A=P(1+\dfrac{r}{n})^{nt}$$

Given $P=17000, t=5$

Quezon Metropolitan Bank: $r=0.075, n=2$

$$A=17000(1+\dfrac{0.075}{2})^{2(5)}=24565.75$$

Quezon Premier Bank: $r=0.07, n=12$

$$A=17000(1+\dfrac{0.07}{12})^{12(5)}=24099.63$$

She should deposit her money Quezon Metropolitan Bank .