SOLUTION: Hello, I have a question regarding algebra in finance that I'm having problems with. The question is. If you have $8000 to invest in an RESP for 7 years, which of the following

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Question 390758: Hello, I have a question regarding algebra in finance that I'm having problems with. The question is.
If you have $8000 to invest in an RESP for 7 years, which of the following two investment options should you choose. Justify your answer.
option #1-6% compounded semi-annually
Option #2- 7.5% simple interest
Thankyou in advance to anybody who can help me!
Answer by solver91311(24713) (Show Source):
You can put this solution on YOUR website!

The formula for compound interest at discrete compounding intervals is:

where: is the future value, is the investment amount, is the interest rate (expressed as a decimal) per time period ( is generally taken to be 1 year), and is the number of compounding periods per time period .

A little calculator work will get you the value of the 6% investment.

Simple interest is nothing but the interest rate applied to the principal amount each year.

where: is the future value, is the investment amount, and is the interest rate (expressed as a decimal) per time period ( is generally taken to be 1 year).

Again, a little calculator arithmetic gets you the answer. Compare the two amounts to make your decision. I would choose the larger one, but far be it from me to tell you what to do.

John

My calculator said it, I believe it, that settles it