Compound & Simple Interest Investment Analysis

You have been given £5000 to invest for 8 years and a number of banks have approached you to offer their services. In order to maximise your investment, you need to decide which bank is offering you the best deal. Some banks are offering you compound interest and some banks are offering you compound interest, so be careful to use the right calculation. 6% compound interest for 8 years 8% simple interest for 8 years 5% compound interest for the first 5 years 6% simple interest on the new balance for the remaining time (3 years) 6.5% compound interest for 8 years

6% compound interest for 8 years £5000 × = £ Solutions

£ (400) = £8200 8% simple interest for 8 years 8% of £5000 = £400 Solutions

£5000 × = £ % compound interest for 8 years Solutions

5% compound interest for the first 5 years 6% simple interest on the new balance for the remaining time £5000 × = £ % of £ = £ £ (382.88) = £ Solutions