You have two options as outlined below. Which option would you choose? Why? Show your workings to explain your decision.

- Option 1: A bank offers you a 5% rate of return on your deposit, compounded annually. You have saved $1,350 from cutting down on drinking coffee. How much will you have in your savings account in 2 years' time?

-Option 2: The bank now offers you the same 5% rate of return on your deposit, but compounded quarterly. How much will you have in your savings account in 2 years' time? Are you still earning 5% per annum? Explain!