Granny wishes to give her grandchild $10,000 when the child turns 18 in 10 years time.  She has two options:-

Option 1: She can make 10 equal deposits (1st in one year’s time, 2nd in two years’ time etc) at 6% per annum compounded yearly.

(1) How much is each annual deposit under this option?

Option 2: She can invest a lump sum now at 6% per annum compounded monthly.

 (ii) How much does the lump sum need to be under this option?

 (iii) Calculate the effective rate of interest (i_eff ) of her investment at Option 2 and find the total amount of interest she will have earned over the term of the investment in Option 1

i_eff (Option 2)=

Total Interest earned (Option 1) =