Question

6. Two friends, Joseph and Adrian each invested an amount of R20 000 at their respective banks

on the same day, a year ago. When they received their investment statements after one year,
Joseph was upset because his investment did not grow at the same rate as that of Adrian. He
went to the bank and asked the consultant why he received so much less. She told him that,
although the monthly compound interest rate was a little lower (6,96%) compared to the 7,5%
simple interest rate of Adrian, his investment would be worth more at the end of the next year.
6.1 Use calculations to comment on the truthfulness of the statement that was made by the
banking consultant.
Draw two graphs that will represent the growth of the two investments for the first
three years, on the same set of axis. (You must first calculate the values to use to plot
the co-ordinates.)
Interpret the graphs and discuss your findings from the graph.

Answer 1

Explanation:

6.1

After 2 years Adrian's investment gains

20000 * 2*0.075

= R3000

After 2 year's Joseph will have a total of

20000(1 + 0.0696)^2

= 22880.88

- an increase of R2280.88.

So the consultant was incorrect.