Question

If the compounding monthly interest rate in month 1 is 1%, month 2: 1.5% and month 3: 1.25% which of these options is better?

  

Receiving $300 after 3 whole months have passed. 


  

Receiving $306.00 after 3 whole months have passed. 


  

Receive 3 payments of $100 at the start of each month for 3 months. 


  

Cannot tell from this information. 


Answer 1

ANSWER = C) Receive 3 payments of $100 at the start of each month for 3 months.

Compounding Interest rate

Month = 1%

Month 2 = 1.5%

Month 3 = 1.25 %

Receiving $300 after 3 whole months have passed

Receiving $306.00 after 3 whole months have passed

Receive 3 payments of $100 at the start of each month for 3 months.

Year	monthly payments	Value at end of Month
1	100	101
2	100	204.015
3	100	307.82

Option C) is better as we receive 307.82 at end of year 3