Mei Ling wants to invest $\$30\ 000$ for $3\text{ years}$. She is considering the following

Question

Mei Ling wants to invest $\$30\ 000$ for $3\text{ years}$. She is considering the following two options. Option X $3.2\%$ per annum compounded half-yearly. An administration fee of $\$80$ is deducted from the amount received at the end of the $3\text{ years}$. Option Y$3.35\%$ per annum simple interest with no administration fee. Mei Ling says that Option X must be better because compound interest is used. Is Mei Ling correct? Support your answer with calculations.

Accepted Answer

No. Option Y is better, by approximately $\$97.31$.

Standard Form and Compound Interest - Comparing Simple and Compound Interest Plans

Standard Form and Compound Interest - Comparing Simple and Compound Interest Plans

Solution:

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