Question

Cameron invests $1000. He has a choice of two schemes:

Scheme A offers $25 every year.
Scheme B offers 2% interest compounded annually.
Over what periods of investment (in whole years) is scheme A better than scheme B?

Answer 1

Scheme A offers $25 every year while Scheme B offers 2% interest compounded annually. To determine when Scheme A is better, we can set up an equation and solve for the number of years.

Step-by-step explanation:

Scheme A offers a fixed amount of $25 every year, while Scheme B offers a 2% interest compounded annually.

To determine over what periods of investment Scheme A is better than Scheme B, we need to find the number of years when the amount accumulated in Scheme A is greater than Scheme B.

We can set up an equation where:

Scheme A: 25n > Scheme B: 1000(1.02)n

Solving this equation will give us the number of years when Scheme A is better than Scheme B.