Miguel just graduated from university. He plans to work for 5 years and then study a PhD degree. He figures he can save $5000 in the first year and will be able to save 10% more than the previous year in each of the next 4 years. His saving account pays an interest rate of 6.6% p.a. and the interests are compounded annually.

According to the agreement, Miguel has to pay back the loan balance in 15 years with the same repayment amounts. If the bank offers Miguel two options to repay the loan, calculate and identify which option Miguel should accept?

• Option 1: Annual percentage rate of 3.4% and the repayments are made per fortnight.
• Option 2: Annual percentage rate of 3.6% and the repayments are made monthly