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 July 5th, 2018, 09:05 PM #1 Newbie   Joined: Jul 2018 From: Fiji Posts: 1 Thanks: 0 Term Deposit Someone is considering taking a long term deposit. These are the rates: 12 months - 4.25% p.a 24 months - 5.00% p.a 36 months - 6.00% p.a 48 months - 6.25% p.a 60 months - 6.50% p.a - If they choose to invest \$5000 for 60 months with interest paid at maturity, what will their return be? - If they invest \$5000 in yearly increments (1, 2, 3, 4 & 5) (\$5000 for year 1 + Balance paid at maturity reinvested for another 2 years and so forth.) what will their return be? How many years will it take altogether using this method? Last edited by greg1313; July 5th, 2018 at 11:40 PM. July 6th, 2018, 03:26 AM #2 Math Team Joined: Jan 2015 From: Alabama Posts: 3,264 Thanks: 902 Quote:  Originally Posted by jshhndsd Someone is considering taking a long term deposit. These are the rates: 12 months - 4.25% p.a 24 months - 5.00% p.a 36 months - 6.00% p.a 48 months - 6.25% p.a 60 months - 6.50% p.a - If they choose to invest \$5000 for 60 months with interest paid at maturity, what will their return be?
Since this was for 60 months the interest is, as given above, 6.50%? If so then 60 months is 5 years so the total interest earned is \$5000(0.065)(5)=\$1625.

Quote:
 - If they invest \$5000 in yearly increments (1, 2, 3, 4 & 5) (\$5000 for year 1 + Balance paid at maturity reinvested for another 2 years and so forth.) what will their return be? How many years will it take altogether using this method?
Your "another 2 years" confuses me. Is the $5000 initially invested left for two years before being reinvested? And is it then reinvested only for two more years, not the remaining three years? I will treat this as "compound interest", compounded annually. If the \$5000 initially invested is reinvested annually along with the interest earned, then, in 5 years it will have accrued to $\displaystyle \$5000(1+ r)^{5}$so$\displaystyle \$5000(1+ r)^{5}-\$5000$in interest. You can then treat the \$5000 invested the second year separately. It will earn $\displaystyle \$5000(1+ r)^4- \$5000$ interest, etc.

Last edited by skipjack; July 6th, 2018 at 06:16 AM.

July 6th, 2018, 09:36 AM   #3
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Quote:
 Originally Posted by jshhndsd Someone is considering taking a long term deposit. These are the rates: 12 months - 4.25% p.a 24 months - 5.00% p.a 36 months - 6.00% p.a 48 months - 6.25% p.a 60 months - 6.50% p.a - If they choose to invest \$5000 for 60 months with interest paid at maturity, what will their return be? I'm guessing that interest compounds annually: the value after 5 years will be 5000*(1.065)^5 = 6850.43 If you mean something else, reword your question properly; as is, it makes little sense.... July 6th, 2018, 09:38 AM #4 Math Team Joined: Oct 2011 From: Ottawa Ontario, Canada Posts: 14,597 Thanks: 1038 Quote:  Originally Posted by jshhndsd Someone is considering taking a long term deposit. These are the rates: 12 months - 4.25% p.a 24 months - 5.00% p.a 36 months - 6.00% p.a 48 months - 6.25% p.a 60 months - 6.50% p.a - If they invest \$5000 in yearly increments (1, 2, 3, 4 & 5) (\\$5000 for year 1 + Balance paid at maturity reinvested for another 2 years and so forth.) what will their return be? How many years will it take altogether using this method?
This one makes no sense at all...sorry...

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