Due: 7th August

Financial Maths Di
This assignment includes finding the better option for your grandparents to choose either simple
interest or compound interest and how many years. This assignment will also include a graph
and finding out the compound interest quarterly. The compound interest will work out better for
the long time (10 years) as the more money in your bank accountant, the more interest you will
get. Unlike simple interest where you will get the same amount of interest throughout all the
years.
See Google sheets for the mathematical working out.
Discussion
In part 1 the balance for simple interest after 10 years was $3,150 the interest rate was 5.75%
therefore making the interest $115 per year. Unlike the simple interest the compound interest
kept getting bigger as there was more money after every year. The balance after 10 years was
$20,017, the interest rate was 4.8% and the interest was as little as $97 after a year and $6,537
after 10 years. The total interest earned after 10 years were $18,017 for compound interest and
the total interest for simple interest is $1,150.
Compound interest earns more interest for the first 4 years as it earns $1,156 unlike the simple
interest which only earns $460. Compound interest earns more interest as when the account
balance increases so does the interest. Which is not the same case for simple interest as the
amount of interest stays the same throughout the 4 years.
The graphs shown on google sheets show that the simple interest has a gradual and even
increase. Compound interest graph has an uneven increase in the amount and the graph has a
curve to it. As it has a slow increase and gradually increases largely, both graphs are very
different as they show two very different increases.
The advantage of simple interest is that it is easier to work how much money you will receive
yearly. For the first two years simple interest earns more money than compound interest and
earns the same amount in the third year. Therefore it would be a good option for the first couple
of years. The disadvantage of simple interest is that the interest always stays the same amount
during out the period as it only earns interest from the principle. Which means it wont earn as
much as compound interest and you will get very little money compared to compound interest.
The advantage of compound interest is that over the years you will earn more interest as your
bank balance will increase. It is a good option for after the first two years, as you earn a decent
amount of money within the years. Compound interest also uses your principle plus the interest
therefore you will earn more interest the following year. The disadvantage of compound interest

is that the first two years you wont earn a lot of money and that it is more harder than simple
interest.
If the investment was to continue past the 10 years as originally mentioned the simple interest
would earn far less than the compound interest. As the compound interest would increase a
great amount, which would earn a lot. The simple interest would barely earn any money
compared to compound interest. Therefore the better option would be compound interest if it
were to continue past 10 years.
In part 2 when the compounding interest changed from yearly to quarterly, the interest was
lesser than compounding yearly. It ended up to be approximately $7,300 in difference which is a
fair bit of money. The calculations done by hand on the graphics matched those done on google
spreadsheets. The calculations matched as the formulas on spreadsheets matched the graphic
calculator.
Conclusion
The option that the grandparents should choose to investment their $2,000 is compound interest
for 10 years. That way you can earn the most amount of money out of your investment. This Di
covered compound interest yearly and monthly, it also included simple interest yearly. Also
discovered which option is better for the grandparents to invest their money, and discussed the
results shown in the mathematical investigation.