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10 You have $20000 to invest for one year. You put it in the following bank account: 'Flexible Saver': 1.5% interest APR Interest calculated monthly (i.e. % of balance each month). Interest paid annually, into a separate account. >> >> No limits on withdrawals or balance. Your bank then informs you of a new savings account, which you are allowed to open as well as the Flexible Saver. 'Regular Saver': 5% interest APR Interest calculated monthly (i.e. % each month). >> Interest paid annually, into a separate account. >> Maximum $1000 balance increase per month. >> (i) Assuming you initially have your money in the Flexible Saver, but transfer as much as you can into a Regular Saver each month, calculate how much extra money you will earn, compared to what would happen if you just left it in the Flexible Saver all year. (ii) Generalise your result – given an investment of I (in thousands of dollars), and a time of n months – what interest will you earn? (Assume n < I, or you'll run out of funds to transfer.)

10 You have $20000 to invest for one year. You put it in the following bank account: 'Flexible Saver': 1.5% interest APR Interest calculated monthly (i.e. % of balance each month). Interest paid annually, into a separate account. >> >> No limits on withdrawals or balance. Your bank then informs you of a new savings account, which you are allowed to open as well as the Flexible Saver. 'Regular Saver': 5% interest APR Interest calculated monthly (i.e. % each month). >> Interest paid annually, into a separate account. >> Maximum $1000 balance increase per month. >> (i) Assuming you initially have your money in the Flexible Saver, but transfer as much as you can into a Regular Saver each month, calculate how much extra money you will earn, compared to what would happen if you just left it in the Flexible Saver all year. (ii) Generalise your result – given an investment of I (in thousands of dollars), and a time of n months – what interest will you earn? (Assume n < I, or you'll run out of funds to transfer.)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please help with Q10 with a greater focus on explanation rather than the answer . Thank You. 

10 You have $20000 to invest for one year. You put it in the following bank account: 'Flexible Saver': 1.5% interest APR Interest calculated monthly (i.e. % of balance each month). Interest paid annually, into a separate account. >> >> No limits on withdrawals or balance. Your bank then informs you of a new savings account, which you are allowed to open as well as the Flexible Saver. 'Regular Saver': 5% interest APR Interest calculated monthly (i.e. % each month). >> Interest paid annually, into a separate account. >> Maximum $1000 balance increase per month. >> (i) Assuming you initially have your money in the Flexible Saver, but transfer as much as you can into a Regular Saver each month, calculate how much extra money you will earn, compared to what would happen if you just left it in the Flexible Saver all year. (ii) Generalise your result – given an investment of I (in thousands of dollars), and a time of n months – what interest will you earn? (Assume n < I, or you'll run out of funds to transfer.)
Transcribed Image Text:10 You have $20000 to invest for one year. You put it in the following bank account: 'Flexible Saver': 1.5% interest APR Interest calculated monthly (i.e. % of balance each month). Interest paid annually, into a separate account. >> >> No limits on withdrawals or balance. Your bank then informs you of a new savings account, which you are allowed to open as well as the Flexible Saver. 'Regular Saver': 5% interest APR Interest calculated monthly (i.e. % each month). >> Interest paid annually, into a separate account. >> Maximum $1000 balance increase per month. >> (i) Assuming you initially have your money in the Flexible Saver, but transfer as much as you can into a Regular Saver each month, calculate how much extra money you will earn, compared to what would happen if you just left it in the Flexible Saver all year. (ii) Generalise your result – given an investment of I (in thousands of dollars), and a time of n months – what interest will you earn? (Assume n < I, or you'll run out of funds to transfer.)
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