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Compound Interest

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The Question:

If I have \$60,000 in savings currently nd plan to save \$1,000 per fortnight, which is the best account for me?

Assume the time period is 10 years.

Option 1:

My current savings account is a special savings account. It has a basic interest rate of 0. 1% but if you deposit more than \$1,000 in a month and have no withdrawals, then you get bonus interest of 1.8 5% for a total of 1.95% p.a. (Interest is calculated daily.)

Option 2:

The bank just emailed me asking if I am interested in a new BONUS SAVER Account that they are trialing to special customers. It has a bonus rate of 2.5% p.a. on all new deposits for the first 4 months and then the interest rate drops down to 1.0% p.a.

However, all interest on new deposits will still be at the BONUS RATE of 2.5% (for 4 months).

I only need the answer but an explanation would be really helpful

May 6, 2020
edited by Guest  May 6, 2020

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Go to your first post. Which is it, for 1 year or 10 years?

May 6, 2020
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Both years would be cool but i made a typo, its 10 years

MathsLlama  May 6, 2020
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Well in real life I'd say to first put 60000 in Option 2 after 4 months bring it to option one

idk tho I'm not an expert at finance

Ok here we go!

You have 60000 and 1000/ 2wks

that's 120 wks.

So you'd get 1+2+3+4...+120(1.95% * 1000)

This is since you see, first you have 1000, then you add another 1000, so we now have 2000, and kinda using dist. property.

Of course this calculated weekly

I suppose we multiply 14 with this for 14 days

so 1+2+3...+120 is 121 * 60 = 7260

1.95 %= 0.0195 since we divide 100

7260* (1.95) * 14 = 198198

That doesn't seem right. Are you sure it's supposed to be that interest is given daily?

well... backtrace!

You get 14157 dollars in interest if you bank 1000 dollar increments over 120 weeks, to a total of 60,000

Not too shabby. I got 0.14 dollars for the same amount every 6 months at TD...

Treasury bonds are much better ( if you are in the US)

OKAY plan 2.

For this just do something like put some of your money in, then put more money in after that, but not more than like idk 2000 every 4 months

you are going to have to do some crunching tho

Good luck with your future financial endeavors!

If you don't as anything feel free to ask

May 6, 2020