Question: Explain which of the two options below results in a lower balance after 6 months on an investment of $6,000.
1) Annual simple interest of 12% applied at the end of 6 months.
2) A monthly interest rate of 1% applied at the end of each month and before the start of the next month. (Compound interest at 12% per year, compounded monthly.)
Discuss why the two methods result in different results.
In what circumstances might you select one option over another?