John has saved $1000 and is evaluating 2 option for the bank deposits for a period of 5 y

Bank A - Bank A is offering 6% per annum simple interest

Bank B - Bank B is offering 5.5 % per annum compound interest

Can you help john to identify which of the two option is more beneficial for him

Bank A Bank B

P 1000 P 1000
r 0.06 r 0.055
t 5 t 5

Year Interest Year Interest Old P New P

1 60 1 55 1000 1055
2 60 2 58.025 1055 1113.025
3 60 3 61.21638 1113.025 1174.241
4 60 4 64.58328 1174.241 1238.825
5 60 5 68.13536 1238.825 1306.96

Total 1300 Total 1306.96

ank deposits for a period of 5 years

erest

ore beneficial for him

 John is evaluating two investment opportunities for investing $10,000

Option A - Buy a car worth $10000, it will give $2000 for 5 years and he can sell it for $40
5th year

Option B - loan $10,000 to his trustworthy friend, for which he will get $500 for first 2 ye
2 years and $3000 for next 3 years

Can you help john to identify which of the two option is more beneficial for him. Risk Fre
bank saving account is 6 %

Option A Option B

P 10000 P 10000
r 0.06 r 0.06
Value 4000 Value 0

Year Return -10000 Year Return -10000

1 2000 2000 ($1,886.79) 1 500 500
2 2000 2000 ($3,666.79) 2 500 500
3 2000 2000 ($5,346.02) 3 2000 2000
4 2000 2000 ($6,930.21) 4 2000 2000
5 2000 6000 ($8,424.73) 5 3000 3000
6 3000 3000
Total ₹ 11,413.76 7 3000 3000
IRR 10% Total ₹ 10,531.95
IRR 7%
ng $10,000

ears and he can sell it for $4000 at the end of

he will get $500 for first 2 year, $2000 for next

re beneficial for him. Risk Free interest rate in

1