Answer:
Explanation:
Let's first calculate the return on investment for each option and then compare them to see which one is more financially rewarding.
Option A offers a simple interest rate of 20.25% per annum. Simple interest means that the interest is calculated only on the principal amount, and not on the interest earned in previous years. So, after 7 years, the total amount that Sipho would have is:
Total amount = Principal + (Principal x Interest Rate x Time)
Total amount = 7500 + (7500 x 0.2025 x 7)
Total amount = 7500 + 10631.25
Total amount = 18131.25
Option B offers a compound interest rate of 15% per annum, compounded annually. Compound interest means that the interest is calculated on the principal amount as well as on the interest earned in previous years. So, after 7 years, the total amount that Sipho would have is:
Total amount = Principal x (1 + Interest Rate) ^ Time
Total amount = 7500 x (1 + 0.15) ^ 7
Total amount = 7500 x 2.6401
Total amount = 19800.75
Therefore, Option B would be more financially rewarding for Sipho, as he would have R19,800.75 after 7 years, compared to R18,131.25 that he would have with Option A.