Question 1 (7 marks)

A 3-year investment has a quoted interest rate of 15%. You wish to invest AUD 75,000.

A). Calculate the expected returns from year 1 to year 3 if the investment earns simple interest. (1 x 3 = 3 marks)

B). Calculate the expected returns from year 1 to year 3 if the investment earns compound interest. (1 x 3 = 3 marks)

C). Is there a difference in the returns you have calculated? Explain why. (1 mark)Type mark)