Marco wants to invest his savings in a bank for 3 years he has £15000 to invest and receives office. Two bank
Bank of peace- 2.5% per year compound interest
Bank of trust - 3.8% for 1st year 1% for each extra year compound interest
Which bank should marco choose to get the most interest over the 3 year period
To calculate the interest earned over 3 years, we need to calculate the compound interest for both banks.
Bank of peace:
Interest rate = 2.5% per year
Principal = £15,000
Time = 3 years
Interest = Principal * (1 + interest rate)^time - Principal
Interest = £15,000 * (1 + 0.025)^3 - £15,000
Bank of trust:
Interest rate = 3.8% for the first year, 1% for each extra year
Principal = £15,000
Time = 3 years
Interest = Principal * (1 + 0.038)^1 * (1 + 0.01)^(time-1) - Principal
Interest = £15,000 * (1 + 0.038)^1 * (1 + 0.01)^(3-1) - £15,000
Calculating the interest for both banks:
Bank of peace: £15,625 - £15,000 = £625
Bank of trust: £15,615 - £15,000 = £615
Therefore, Marco should choose the Bank of Peace as he would earn more interest over the 3-year period.