Question 1202153
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Parents of a newborn baby are given a gift of Php 50,000 and will choose between two options to invest
for their child’s college fund. Option 1 is to invest the gift in a fund that pays an average annual 
interest rate of 8% compounded semiannually; option 2 is to invest the gift in a fund that pays 
an average annual interest rate of 7.75% compounded continuously. Which is the better option, assuming 
each investment has a term of 18 years? Why? Support your answer with calculations.
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Lets calculate one year growing coefficient: it is enough to make a selection.


Option 1 has one year growing coefficient  {{{(1+0.08/2)^2}}} = {{{1.04^2}}} = 1.0816.


Option 2 has one year growing coefficient {{{e^0.0775}}} = {{{2.71828^0.0775}}} = 1.08058 (rounded).


Comparing, it is clear that option 1 is better (without making long calculations for 18 years).
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Solved.