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Harry has $100,000 and decided to invest it efficiently. The Best Bank is offering a 1-year term deposit which pays a simple annual rate of
Harry has $100,000 and decided to invest it efficiently. The Best Bank is offering a 1-year term deposit which pays a simple annual rate of interest of 4%. Interest is compounded fortnightly.
a) What is the effective rate of interest? (2 marks)
b) How much will Harry have in his account at the end of 1 year assuming he makes no withdrawals? (2 marks)
c) All other things being equal, should Harry deposit his money into the Best Bank or lend Michael for 4.05% per year, compounded monthly? (2 marks)
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