# math

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Jim wants to deposit money in an account to save for a new stereo system in two years. He wants to have \$4,000 available at the time. The following rates are available to him:
6.2% simple interest
6.1% compounded annually
5.58% compounded semiannually
5.75% compounded quarterly

Which account(s) should he choose if he wants to invest the smallest amount of money now? I was thinking the 5.57% compunded quarterly or 5.58% compounded semiannually

How much money must he invest to accumulate \$4,000 in two years'time?

• math -

Imagine you start with \$1 (or \$1,000 if you prefer).

How much would you have at the end of two years, under each of the schemes?

For example, under the second, starting with \$1, you would have

\$1 * 1.06 = \$1.061 at the end of the first year

\$1.061 * 1.06 = \$1.12466 at the end of the second year

So to end with \$4000, you'd have to start with \$4000 / 1.12466.

Do the same for the others, and you have your answer.

(And yes, it's one of those two.)

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