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July 5th, 2018, 10:05 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 6th, 2018 at 12:40 AM. 
July 6th, 2018, 04:26 AM  #2  
Math Team Joined: Jan 2015 From: Alabama Posts: 3,261 Thanks: 895  Quote:
Quote:
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 07:16 AM.  
July 6th, 2018, 10:36 AM  #3  
Math Team Joined: Oct 2011 From: Ottawa Ontario, Canada Posts: 13,804 Thanks: 970  Quote:
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, 10:38 AM  #4  
Math Team Joined: Oct 2011 From: Ottawa Ontario, Canada Posts: 13,804 Thanks: 970  Quote:
Please repost clearly.  

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