Marco wants to invest his savings in a bank for 3 years. he has ? 15000 to invest and recieves offers from two banks: bank of peace= 2.5% a year compound interest or bank of trust= 3.8% for 1st year 1% extra for each extra year. which bank should marco choose to get the most interest over the three year period? you must show all your working

Amount to be invested = 15000

Time period = 3 years

1st offer: Bank of Peace

Rate of interest or 'r'= 2.5% per year or 0.025

Time or 't' = 3 year (As Macro wants to invest for 3 years)

Compound interest formula is =

Here A = 15000; r=0.025; t=3; n=1 (n is the number of times interest is compounded per year)

Putting all the values in the given formula we get

= 16153.36

Hence total interest earned = 16153.36-15000 = 1153.36

2nd offer: Bank of Trust

This bank is giving rate of interest as 3.8% for 1st year and 1% extra for each extra year.

Means 1st year rate = 3.8%

2nd year rate = 4.8%

3rd year rate = 5.8%

So putting the values of A = 15000; r=3.8 or 0.038 ; t=1 (the interest change changes after 1st year) and n=1 in the formula we get

For 1st year the amount becomes =

= 15570

For next year the interest rate is 4.8% and P = 15570 and r=4.8% or 0.048 and t=1

Amount becomes = 16317.36

For third year the rate becomes 5.8% and P= 16317.36 t= 1 and n=1

So amount becomes = 17263.77

Hence total interest earned = 17263.77- 15000 = 2263.77

Hence, the Bank of trust is preferable for Macro as it gives a higher interest value.

what are you trying to solve here

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