Scenario

Mr Brown is seeking your advice on two investment plans for a $10,000 inheritance.

The first option is to place it in a bank fixed-term deposit account for three years and earn interest of 4% p.a. compounded half-yearly.

The second option is to lend the money to a relative who has offered to pay him simple interest of 5% for the three years, and will repay the loan with interest at the end of the three year period.

Task Advise Mr Brown which option would provide the better result for him and by how much.

Task b)

Which TWO of the following will give the same amount at the end of the investment?

( a )10% compounded half yearly for 2.5 years

( b )5% compounded annually for 2.5 years

( c )10% compounded annually for 5 years

( d )5% compounded annually for 5 years

You are required to show calculations for each option.