Answer to Question #295608 in Financial Math for Light

Question

Jenny is planning to deposit ₱17,000.00 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. Which bank should she

deposit her money? Justify your answer by computing and comparing the maturity value for each bank.

Answer 1

$FV=PV(1+\frac{r}{n})^{n×t}$

For Quezon Metropolitan Bank:

PV= ₱17,000.00

r = 7.5%

t = 5years

n= 2

$FV = 17,000.00(1+$$\frac{0.075}{2})^{2×5}$

$=17,000.00(1.0375)^{10}=₱ 24565.75$

For Quezon Premier Bank:

PV= ₱17,000.00

r = 7%

t = 5years

n= 12

$FV = 17,000.00(1+$$\frac{0.07}{12})^{12×5}$

$=17,000.00(1.005833)^{60}=₱ 24099.15$

She should deposit her money with Quezon Metropolitan Bank since it has higher maturity value compared to Quezon Premier Bank