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The bank is offering term deposits with an interest rate of

An investor wishes to invest $10,000 in a term deposit with a bank for a term of 2 years. The bank is offering term deposits with an interest rate of 3% per annum with annual compounding, or an interest rate of 2.95% per annum with half-yearly compounding, or an interest rate of 2.9% per annum with monthly compounding.

(a) Which term deposit is the best investment?

(b) Calculate the future value (FV) of the best investment.

(c) If the marginal income tax rate for the investor is 45%, what is the total amount of interest received after tax for the best investment?

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