You have 2000 to invest Which is the better option of the fo

You have $2000 to invest. Which is the better option of the following?

option 1: 45 week term deposit, simple interest @2.75% or

option 2: 45 weeks @2.5% compounded weekly

Solution

(1) $2000 invested for 45 weeks at 2.75% simple interest.

[2000(1+.0275*45/52)=2047.60]

** Simple interest [A=P(1+rt)] where A is the amount at time t, P is the principle, r is the annual interest rate, and t is the time in years. **

(2) $2000 invested for 45 weeks at 2.5% annual interest compounded weekly:

[2000(1+.025/52)^45=2043.73]

** Compound interest [A=P(1+r/m)^(n)] where A is the amount after time t, P is the principle, m is the number of compounding periods per year, and n is the total number of compounding periods.