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Can someone please help me with this question (and show working out) I’ve been struggling with it for so long. Thank you.

Can someone please help me with this question (and show working out) I’ve been struggling-example-1

1 Answer

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**a. Fixed-term deposit for 3 months**

In this case, Chris will have 4 quarterly investments, each for 3 months.

**Investment 1:**

Interest earned after 3 months = (6.5/100)*$50000 = $3250

**Investment 2:**

Chris will reinvest the $3250 in addition to the original $50000, so the total investment amount will be $53250.

Interest earned after 3 months = (6.5/100)*$53250 = $3453.75

**Investment 3:**

Chris will reinvest the $3453.75 in addition to the original $50000, so the total investment amount will be $53453.75.

Interest earned after 3 months = (6.5/100)*$53453.75 = $3488.06

**Investment 4:**

Chris will reinvest the $3488.06 in addition to the original $50000, so the total investment amount will be $53488.06.

Interest earned after 3 months = (6.5/100)*$53488.06 = $3490.24

**Total interest earned after 12 months:**

$3250 + $3453.75 + $3488.06 + $3490.24 = **$13682.05**

**Graph:**

[Plot of the interest earned after 12 months for a fixed-term deposit for 3 months with reinvestment]

**b. Fixed-term deposit for 6 months**

In this case, Chris will have 2 semi-annual investments, each for 6 months.

**Investment 1:**

Interest earned after 6 months = (7/100)*$50000 = $3500

**Investment 2:**

Chris will reinvest the $3500 in addition to the original $50000, so the total investment amount will be $53500.

Interest earned after 6 months = (7/100)*$53500 = $3745

**Total interest earned after 12 months:**

$3500 + $3745 = **$7245**

**Graph:**

[Plot of the interest earned after 12 months for a fixed-term deposit for 6 months with reinvestment]

**c. Fixed-term deposit for 12 months**

In this case, Chris will have 1 annual investment, for 12 months.

Interest earned after 12 months = (7.5/100)*$50000 = **$3750**

**Graph:**

[Plot of the interest earned after 12 months for a fixed-term deposit for 12 months without reinvestment]

It is clear that the total interest earned after 12 months is highest for the fixed-term deposit for 3 months with reinvestment. This is because the interest is compounded every quarter, which means that the interest is earned on the interest that has already been earned.

User Priya Ranjan Singh
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