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To determine which investment is better for Siphon over 10 years, we can calculate the final amount for both options.
Option 1: Bank with compound interest
Principal amount (P) = R5000
Annual interest rate (r) = 6.5%
Number of years (t) = 10
The formula for compound interest is: A = P(1 + r/100)^t
A = 5000(1 + 6.5/100)^10
A = 5000(1.065)^10
A = 5000(1.790847)
A = R8954.24
Option 2: Uncle with simple interest
Principal amount (P) = R5000
Annual interest rate (r) = 7.5%
Number of years (t) = 10
The formula for simple interest is: A = P(1 + rt/100)
A = 5000(1 + 7.5*10/100)
A = 5000(1 + 75/100)
A = 5000(1.75)
A = R8750
Comparing the final amounts:
With the bank (compound interest): R8954.24
With the uncle (simple interest): R8750
Therefore, investing with the bank offering 6.5% compound interest per year is the better option for Siphon over 10 years.