First, let's calculate how much each bank would offer at the end of 5 years:
Bank Venus:
Year 1: £21000 * 2.1% = £441 interest
Year 2: (£21000 + £441) * 2.1% = £462.63 interest
Year 3: (£21000 + £441 + £462.63) * 2.1% = £485.32 interest
Year 4: (£21000 + £441 + £462.63 + £485.32) * 2.1% = £509.16 interest
Year 5: (£21000 + £441 + £462.63 + £485.32 + £509.16) * 2.1% = £534.19 interest
Total interest from Bank Venus over 5 years: £2452.30
Bank Pacific:
Year 1: £21000 * 4.9% = £1029 interest
Year 2: (£21000 + £1029) * 1.5% = £347.85 interest
Year 3: (£21000 + £1029 + £347.85) * 1.5% = £360.32 interest
Year 4: (£21000 + £1029 + £347.85 + £360.32) * 1.5% = £373.34 interest
Year 5: (£21000 + £1029 + £347.85 + £360.32 + £373.34) * 1.5% = £386.93 interest
Total interest from Bank Pacific over 5 years: £2497.36
Therefore, Milos should choose Bank Pacific as it offers the most interest over the 5-year period.
Milos wants to invest his savings in a bank for 5 years. He has £21000 to invest and receives offers from two banks.
Bank Venus:
2.1% per year
Compound interest
Bank Pacific:
4.9% for 1st year 1.5% for each extra year Compound interest
Which bank should Milos choose to get the most interest over the 5-year period? You must show all your working.
1 answer
1 answer