SEKOLAH MENENGAH KEBANGSAAN BUKIT KEMUNING 40460 SHAH ALAM

ADDITIONAL MATHEMATICS PROJECT WORK 2007 FORM 5

FIXED DEPOSIT ACCOUNT AND INTEREST RATE

Student’s Name : Form I.C. No. : :

CHIN WYNN 5 SCIENCE 1 910715-14-5397 PN. ONG LIN LIN

Teacher’s Name :

CHIN WYNN

CONTENTS
NO. TITLE 1. Acknowledgement 2. 3. 4. 5. 6. 7. 8. 9. Introduction Conjecture Discussion Identifying Information Strategy Conclusion Attachment Appendix PAGE 2 3 9 9 11 12 37 44 46

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ACKNOWLEDGEMENT
Firstly, I would like to thank our Additional Mathematics Teacher, Madam Ong Lin Lin for guiding us throughout this project. She explained and showed us every contents of this project clearly. Next, I would like to thank my friends for giving assistance and advice about this project. Besides that, they also gave me some mental support to doing this project. Last but not least, I appreciate that my parents fully believed and supported me. They sacrificed their time to send me to my friend’s house in order to complete this project. They also contributed money for me to carry out this assignment.

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INTRODUCTION
Our group would like to show our kindness by helping Ang, Bakar and Chandran to calculate their annual total income as well as the total amount of money they will receive by saving in the fixed deposit account for the same period of time but of different interest rate. The Theory of Interest

Irving Fisher Biography Irving Fisher (27 Feb 1867-29 April 1947) was an American economist. his father was a teacher and congregational minister, and the son was brought up to believe he must be a useful member of society. Irving had mathematical ability and a flair for inventing things. A week after he was admitted to Yale University, his father died at age 53. Irving carried on, however, supporting his mother, brother, and himself, mainly by tutoring. He graduated from Yale with B.A. degree in 1888. Irving’s best subject was Mathematics. He went on to write a doctorial thesis combining both subjects, on mathematical economics which resulted in his being granted the first Yale Ph. D in economics, in 1891. While most of Fisher’s energy went into “causes” and business ventures, and the better part of his scientific effort was devoted to monetary economics, he is best remembered today for his theory of interest and capital, studies of an ideal world from which the real world deviated at its peril. His most enduring intellectual work has been his theory of capital (economics), investment, and interest rates, first exposited in his 1906 The Nature of Capital and income and 1907 The Rate of Interest. His 1930 treatise, The Theory of Interest, summed up a lifetime’s work on capital, capital budgeting, credit markets, and the determinants of interest rates, including the rate of inflation. 4

CHIN WYNN Definition of Fixed Deposit A bank deposit for a fixed period of time. A fixed-income debt security, usually issued by banks. A Fixed Deposit is like loaning the bank your money. In return, they pay you interest. A specific sum of money deposited in a financial institution for a fixed term earning a pre-agreed interest rate. A deposit of money, generally with a bank, finance company or large corporation, repayable on a certain date. Interest may be payable at regular intervals during the term of the deposit or on withdrawal. 1. Date of Fixed Deposit The effective date of Fixed Deposit shall be the date on which the bank gets funds to its account. No Fixed Deposit Receipt is issued in anticipation of realisation of the cheque. 2. Auto Renewal Fixed deposits are accepted with auto-renewal facility at periodicity as opted by the depositors 3. Fixed Deposit Receipt / Memorandum of Deposit Fixed Deposit Receipt or Memorandum of Deposit will be issued to account holder as may be decided by the Bank from time to time for customer convenience. 4. Tax Deducted at Source Tax at source is deducted as applicable from the interest on fixed deposit, as per Income Tax Act, 1961. 5. Payment of Interest on Fixed Deposit Interest on fixed deposits is reckoned/paid at quarterly intervals, at the rates applicable at the time of acceptance as the case may be, in accordance with RBI directives.

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6. Premature closure of Fixed Deposits In the event of the Fixed Deposit being closed before completing the original term of deposit, interest will be paid at the rate applicable on the date of deposit for the period for which the deposit has remained with the Bank. The deposit may be subject to penal rate of interest as prescribed by the Bank on the date of deposit.

Definition of Bank A bank is a commercial or state institution that provides financial services, including issuing money in form of coins, banknotes or debit cards, receiving deposits of money, lending money and processing transactions. A commercial bank accepts deposits from customers and in turn makes loans based on those deposits. Some banks (called Banks of issue) issue banknotes as legal tender. Many banks offer ancillary financial services to make additional profit; for most banks also rent safe deposit boxes in their branches. Currently in most jurisdictions commercial banks are regulated and require permission to operate. Operational authority is granted by bank regulation bank regulatory authorities and provide rights to conduct the most fundamental banking services such as accepting deposits and making loans. A commercial bank is usually defined as an institution that accepts both deposits and makes loans; there are also financial institutions that provide selected banking services without meeting the legal definition of a bank. Banks have influenced economies and politics for centuries. The primary purpose of a bank was to provide loans to trading companies. Banks provide funds to allow businesses to purchase inventory, and collected those funds back with interest when the goods were sold. For centuries, the banking industry only dealt with businesses, not consumers. Commercial lending today is a very intense activity, with banks carefully analysing the financial condition of its business clients to determine the level of risk in each loan transaction. Banking services have expanded to include services directed at individuals and risk in these much smaller transactions are pooled.

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A bank generates a profit from the differential between what level of interest it pays for deposits and other sources of funds, and what level of interest it charges in its lending activities. This difference is referred to as the spread between the cost of funds and the loan interest rate. Historically, profitability from lending activities has been cyclic and dependent on the needs and strengths of loan customers. In recent history, investors have demanded a more stable revenue stream and banks have therefore placed more emphasis on transaction fees, primarily loan fees but also including service charges on array of deposit activities and ancillary services (international banking, foreign exchange, insurance, investments, wire transfers, etc.). However, lending activities still provide the bulk of a commercial bank's income. The name bank derives from the Italian word banco, desk, used during the Renaissance by Florentines bankers, who used to make their transactions above a desk covered by a green tablecloth.

Moral Values • Responsibility: The society should keep their money in the bank because the bank is the safest and the most reliable place to store cash. By keeping money in the bank, people will get an interest rate and their money grows. The money will not get stolen easily and people will feel secure.

Work opportunities: Having a bank will provide more work opportunities for unemployed people. This will also increase the economic rate of the country. Sooner or later the value of the ringgit will increase and will stand proudly next to the dollar and the Euro.

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ADDITIONAL MATHEMATICS PROJECT WORK 2007 FORM 5

(b)

(c)

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CHIN WYNN period of time, which fixed deposit account would you prefer? Give your reasons.

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CHIN WYNN Further Exploration 2. (a) When Chandran’s first child, Johan is born, Chandran invested RM300 for him at 8% compound interest per annum. He continues to invest RM300 on each of Johan’s birthday, up to and including his 18th birthday. What will be the total value of the investment on Johan’s 18th birthday? If Chandran starts his investment with RM500 instead of RM300 at the same interest rate, calculate on which birthday will the total investment be more than RM25 000 for the first time.

(b)

Note: Compound interest is the interest earned during a period calculated on the basis of the original sum together with interest earned from the previous periods.

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CONJECTURE
Our group predicts that a fixed deposit account of RM10 000 for 3 years without any withdrawal will earn a higher interest if the investment plan offers a higher interest rate per annum. Hence, Chandran should receive the highest total amount of money after 3 years.

DISCUSSION
By using mathematical facts, formulae and methods such as arithmetic progression, geometric progression, listing and counting, different types of interests such as simple interest and compound interest can be calculated. Furthermore, diagrams, tables and graphs are also inserted to help presenting the data and information. Also, all answers in this folio are in at least 4 significant figures.

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CHIN WYNN Mathematical Facts and Formulae that are used Types of Interest Simple Interest Simple interest is the product of the principal, the interest rate (per period), and the number of time periods. To find the simple interest: c = prt, where c (simple interest) is found as the product of p (principal), r (rate) and t (time). For example, Catherin borrows RM23 000 to buy a new car, and the rate is 5.5% over five years. What is the resulting simple interest? RM23 000 x 5.5% x 5 = RM6325 * The simple interest on Cat’s auto loan is RM6325. If Cat repays his debt in full, he will repay RM29 325.

Compound Interest Compound interest is very similar to simple interest. The difference is that the principal changes with every time period, unlike simple interest, where the principal remains the same. The new principal at the end of every time period is essentially the simple interest on the principal at the beginning of the time period, added to the principal.

Progression Arithmetic Progression (A.P.) Tn = a + (n - 1) d Sn = n [ 2a + (n – 1) d ] 2 Geometric Progression (G.P.) Tn = arn - 1
n Sn = a ( r – 1 ) r–1

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IDENTIFYING INFORMATION
• • • To find the interest rate. To find out the best fixed deposit account. The importance of fixed deposit account.

Question 1(a) To determine how much each of them receive at the end of the first year. Question 1(b) To investigate the percentage change in their total income for the second year compared to the first year. Question 1(c)(i) To determine the amount each person will receive after three years. Question 1(c)(ii) To identify the difference in the interest received and the best fixed deposit account.

Further Exploration Question 2(a) To determine the total value of the investment on Johan’s 18th birthday. Question 2(b) To investigate on which birthday the total investment will be more than RM25 000.

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STRATEGY
1. (a) How much does each of them receive at the end of the first year? (Two or more methods are required for this question.)

Method 1: Listing and Manual Calculation Ang’s salary is constant throughout the first year, which is RM2000 per month. Bakar earns RM1000 for the first month and it increases by RM100 for each subsequent month. Chandran makes a profit of RM100 in the first month and it increases by 50% compared to the previous month. Year 1 Ang (RM) Bakar (RM) Chandran (RM) Jan 2000.0000 1000.0000 100.0000 Feb 2000.0000 1100.0000 150.0000 Mar 2000.0000 1200.0000 225.0000 Apr 2000.0000 1300.0000 337.5000 May 2000.0000 1400.0000 506.2500 Jun 2000.0000 1500.0000 759.3750 Jul 2000.0000 1600.0000 1139.0625 Aug 2000.0000 1700.0000 1708.5938 Sep 2000.0000 1800.0000 2562.8907 Oct 2000.0000 1900.0000 3844.3361 Nov 2000.0000 2000.0000 5766.5042 Dec 2000.0000 2100.0000 8649.7563 Total (2 d.p.) 24000.00 18600.00 25749.27 Table 1: Income received by Ang, Bakar and Chandran in the first year

Method 2: Arithmetic Progression (A.P.) and Geometric Progression (G.P.) Total income received by Ang at the end of the first year The salary is same throughout the year, therefore the total income at the end of the first year = RM2000 x 12 = RM24 000.00

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CHIN WYNN Total income received by Bakar at the end of the first year Since Bakar earns a commission of RM1000 for the first month and his commission increases by RM100 for each subsequent month, his monthly commission could be arranged in a number sequence according to the ascending order of the months. RM1000, RM1100, RM1200, ...... (A.P.) Hence, his total commission at the end of the first year could be calculated using arithmetic progression (A.P.). a = RM1000 d = RM1100 – RM1000 = RM100 Sn = n [ 2a + ( n- 1 ) d ], where n = number of months 2 S12 = 12 [ 2 (1000) + ( 12 – 1 ) ( 100 ) ] 2 = 6 [ 2000 + 11 ( 100 ) ] = 6 ( 2000 + 1100 ) = 6 ( 3100 ) = RM18 600.00 Nevertheless, the calculations above have shown that Bakar receives a total of RM18 600.00 at the end of the first year. Total income received by Chandran at the end of the first year Since Chandran makes a profit of RM100 in the first month and his profit increases by 50% more than that of the previous month in each subsequent month, the profits he made in the second, third or the following months could be calculated using the following formulae. Profit in nth month = Profit in ( n – 1 )th month + [ 50% x Profit in ( n – 1 )th month] Profit made in 1st month = RM100 (stated in question)

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CHIN WYNN Profit made in 2nd month = RM100 + ( 50% x RM100 ) = RM100 + RM50 = RM150 Profit made in 3rd month = RM150 + ( 50% x RM150 ) = RM150 + RM75 = RM225 From the calculations above, a number sequence of profits made by Chandran according to the ascending order of the months could be formed. RM100, RM150, RM225, ...... (G.P.) Hence, his total profit at the end of the first year could be calculated using geometric progression (G.P.). a = RM100 r = RM225 RM150 = 1.5
n Sn = a ( r – 1 ), where n = number of months r–1 12 S12 = 100 [ ( 1.5 ) – 1 ] 1.5 – 1 12 = 100 [ ( 1.5 ) – 1 ] 0.5 = RM25 749.27 (2 d.p.)

Henceforth, the calculations above have shown that Chandran receives a total of RM25749.27 at the end of the first year.

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CHIN WYNN 1. (b) What is the percentage change in their total income for the second year compared to the first year? Comment on the answers.

Method 1: Listing and Manual Calculation Ang’s income increases by 10% in the second year. Bakar’s income is reduced by RM50 for each subsequent month. Chandran’s income is reduced by 10% for each subsequent month. Year 2 Ang (RM) Bakar (RM) Chandran (RM) Jan 2200.0000 2050.0000 7784.7807 Feb 2200.0000 2000.0000 7006.3026 Mar 2200.0000 1950.0000 6305.6723 Apr 2200.0000 1900.0000 5675.1051 May 2200.0000 1850.0000 5107.5946 Jun 2200.0000 1800.0000 4596.8351 Jul 2200.0000 1750.0000 4137.1516 Aug 2200.0000 1700.0000 3723.4364 Sep 2200.0000 1650.0000 3351.0928 Oct 2200.0000 1600.0000 3015.9835 Nov 2200.0000 1550.0000 2714.3852 Dec 2200.0000 1500.0000 2442.9467 Total (2 d.p.) 26400.00 21300.00 55861.29 nd Table 2: Income received by Ang, Bakar and Chandran in the 2 year For Ang, the percentage change = RM26 400.00 – RM24 000.00 x 100% = +10% RM24 000.00

For Bakar, the percentage change = RM21 300.00 – RM18 600.00 x 100% RM18 600.00 = +14.52%

For Chandran, the percentage change is = RM55 861.29 – RM25 749.27 x 100% RM25 749.27 = +116.94% 17

CHIN WYNN Method 2: Arithmetic Progression (A.P.) and Geometric Progression (G.P.) Percentage change in Ang’s total income for the second year compared to the first year Ang’s new monthly salary = RM2 000 + 10% increase = RM2 000 + ( RM2 000 x = RM2 000 + RM200 = RM2 200 Total salaries in the 2nd year = RM2 200 x 12 = RM26 400 From the calculations above, Ang earns a total of RM26 400.00 in his second year where he receives an increment of 10% in his monthly pay. The following formulae could be used to calculate the percentage change in his total income for the second year compared to the first year. Percentage change nd st = Total income in the 2 year – Total income in the 1 year x 100% Total income in the 1st year = RM26 400 – RM24 000 x 100% RM24 000 = RM2 400 x 100% RM24 000 = +10% As a result, the result above has shown that the total salary earned by Ang in the second year increased by 10% more than the total salaries in the first year. Specifically, Ang earns an additional RM2400.00 in the second year compared to the first year. 10 ) 100

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CHIN WYNN Percentage change in Bakar’s total income for the second year compared to the first year The income at the end of the first year: 1000, 1100, 1200, ...... (A.P.) a = 1000 d = 100 n = 12 T12 = 1000 + ( 12 – 1 ) ( 100 ) = 1000 + 1100 = RM2100.00 Income for the second year: 2050, 2000, 1950, ...... a = 2050 d = -50 n = 12 Sn = 12 [ 2 ( 2050 ) + ( 12 – 1 ) ( -50) ] 2 = RM21 300.00 From the calculations above, Bakar earns a total of RM21 300.00 in his second year. Percentage change nd st = Total income in the 2 year – Total income in the 1 year x 100% Total income in the 1st year = RM21 300 – RM18 600 x 100% RM18 600 = RM2 700 x 100% RM18 600 = +14.52%

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CHIN WYNN As a result, the result above has shown that the total income earned by Bakar in the second year increased by 14.52% more than the total income in the first year. Specifically, Bakar earns an additional RM2700.00 in the second year compared to the first year.

Percentage change in Chandran’s total income for the second year compared to the first year The income at the end of the first year: 100, 100 x 1.5, 100 x ( 1.5 )2, … 100 x ( 1.5 )11 (G.P.) a = 100 r = 1.5 n = 12 T12 = 100 ( 1.5 )11 = RM8649.76 Income for the second year: T1 = 8649.76 x 0.9 = RM7784.78 7784.78, 7784.78 x 0.9, 7784.78 x ( 0.9 )2, 7784.78 x ( 0.9 )11 a = 7784.78 r = 0.9 n = 12 S12 = 7784.78 [ 1 – ( 0.9)12 ] 1 – 0.9 = RM55 861.28 From the calculations above, Chandran earns a total of RM55 861.28 in his second year.

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CHIN WYNN Percentage change nd st = Total income in the 2 year – Total income in the 1 year x 100% Total income in the 1st year = RM55 861.28 – RM25 749.27 x 100% RM25 749.27 = RM30 112.01 x 100% RM25 749.27 = +116.94% As a result, the result above has shown that the total income earned by Chandran in the second year increased by 116.94% more than the total income in the first year. Specifically, Chandran earns an additional RM30 112.01 in the second year compared to the first year. In general, he has earned more than twice the amount of the total profit he made in the first year.

1st year income 2nd year income Percentage change (RM) (RM) (%) Ang 24 000.00 26 400.00 + 10 Bakar 18 600.00 21 300.00 + 14.52 Chandran 25 749.27 55 861.29 + 116.94 Table 3: Percentage change in the total income received by Ang, Bakar and Chandran respectively

Name

1.
2.

3.

The change is positive for all 3 of them. Ang has the least increase by a fixed amount of 10%. Chandran’s income increase higher than Bakar’s income because his increase is by geometric progression, whereas Bakar’s income increase is by arithmetic progression.

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CHIN WYNN 1. (c) Ang, Bakar and Chandran, each decided to open a fixed deposit account of RM10 000 for three years without any withdrawal. • Ang keeps the amount at an interest rate of 2.5% per annum for a duration of 1 month renewable at the end of each month. • Bakar keeps the amount at an interest rate of 3% per annum for a duration of 3 months renewable at the end of every 3 months. • Chandran keeps the amount at an interest rate of 3.5% per annum for a duration of 6 months renewable at the end of every 6 months. (i) Find the total amount each of them will receive after 3 years.

Method 1: Listing and Manual Calculation For Ang: Interest rate per annum = 2.5% Renewal period = At the end of each month For Bakar: Interest rate per annum = 3% Renewal period = At the end of every 3 months For Chandran: Interest rate per annum = 3.5% Renewal period = At the end of every 6 months

Year 1 Ang (RM) Bakar (RM) Chandran (RM) Investment 10000.0000 10000.0000 10000.0000 Jan 10020.8333 Feb 10041.7100 Mar 10062.6302 10075.0000 Apr 10083.5940 May 10104.6015 Jun 10125.6528 10150.5625 10175.0000 Jul 10146.7479 Aug 10167.8870 Sep 10189.0701 10226.6917 Oct 10210.2973 Nov 10231.5688 Dec 10252.8846 10303.3919 10353.0625 Table 4: Interest received by Ang, Bakar and Chandran in the 1st year

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Year 2 Ang (RM) Bakar (RM) Chandran (RM) Jan 10274.2448 Feb 10295.6495 Mar 10317.0988 10380.6673 Apr 10338.5928 May 10360.1315 Jun 10381.7151 10458.5223 10534.2411 Jul 10403.3437 Aug 10425.0173 Sep 10446.7361 10536.9612 Oct 10468.5001 Nov 10490.3095 Dec 10512.1643 10615.9884 10718.5903 nd Table 5: Interest received by Ang, Bakar and Chandran in the 2 year

Year 3 Ang (RM) Jan 10534.0646 Feb 10556.0106 Mar 10578.0023 Apr 10600.0398 May 10622.1232 Jun 10644.2526 Jul 10666.4281 Aug 10688.6498 Sep 10710.9178 Oct 10733.2322 Nov 10755.5931 Dec (2 d.p.) 10778.00 Table 6: Interest received by Ang, Bakar

Bakar (RM)

Chandran (RM)

10695.6083

10775.8254

10906.1656

10856.6441

10938.07 11097.02 rd and Chandran in the 3 year

The total amount received by Ang after three years is RM10 778.00. The total amount received by Bakar after three years is RM10 938.07. The total amount received by Chandran after three years is RM11 097.02.

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CHIN WYNN Method 2: Geometric Progression (G.P.) The total amount Ang will receive after three years On top of constructing a table to determine the amount of deposit in Ang’s fixed deposit account, the geometric progression method could also be used. Before that, the amount of deposit in the first few months will have to be calculated beforehand. Here, the amount of deposit in the first three months (January, February and March in the first year) is calculated. Principal amount = RM10 000.00000 Amount of deposit in the 1st month = RM10 000.00000 + Interest received in the month 1 = RM10 000.00000 + ( RM10 000.00000 x 2.5% x ) 12 1 = RM10 000.00000 + ( RM10 000.00000 x ) 480 = RM10 020.83333 Amount of deposit in the 2nd month = RM10 020.83333 + Interest received = RM10 020.83333 + ( RM10 020.83333 x = RM10 041.71007 With the principal amount, the amount of deposit in the first and second month, a number sequence could be formed as shown in the following. RM10 000.00000, RM10 020.83333, RM10 041.71007, …… (G.P.) To calculate the amount Ang will receive after three years in his fixed deposit account, geometric progression can now be used. a = RM 10 000.00000 r = RM 10 020.83333 RM 10 000.00000 = 1.002083333 1 ) 480

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CHIN WYNN T37 (Amount at the end of the 36th month) Tn = arn – 1, where n = sequence of month T37 = 10 000 x ( 1.002083333 )36 = RM10 778.00 (2 d.p.) The result from the calculation above has proven that the total amount Ang will receive after 3 years is RM10 778.00. He earns an additional RM778.00 from the interest after keeping RM10 000.00 in his fixed deposit account without any withdrawal for three years.

The total amount Bakar will receive after three years The amount of deposit in the first few months will have to be calculated beforehand. Here, the amount of deposit in the first three months (March, June and September in the first year) is determined. Principal amount = RM10 000.00 Amount of deposit in March (1st year) = RM10 000.00 + Interest received in the month 3 = RM10 000.00 + ( RM10 000.00 x 3% x ) 12 3 = RM10 000.00 + ( RM10 000.00 x ) 400 = RM10 075.00 Amount of deposit in June (1st year) = RM10 075.00 + Interest received = RM10 075.00 + ( RM10 075.00 x = RM10 150.56 3 ) 400

With the principal amount, the amount of deposit in March and June of the 1st year, a number sequence could be formed as shown in the following. RM10 000.00, RM10 075.00, RM10 150.56, …… (G.P.) In order to calculate the amount Bakar will receive after three years in his fixed deposit account, geometric progression can now be used. 25

CHIN WYNN a = RM 10 000.00 r = RM10 075.00 RM10 000.00 = 1.0075 T13 (T1 is the principal amount, T2 is the amount after March of the 1st year, T3 is the amount after June of the 1st year, … T13 is the amount after December of the 3rd year) T13 = 10 000.00 x ( 1.0075 )12 = RM10 938.07 As a result, the calculation above has shown that the total amount Bakar will receive after 3 years is RM10 938.07. On top of that, Bakar earns an additional RM938.07 from the interest after keeping RM10 000 in his fixed deposit account without any withdrawal for three years.

The total amount Chandran will receive after three years The amount of deposit in the first few months will have to be calculated. Here, the amount of deposit in the first three months (June and December in the first year, and June in the second year) is determined. Principal amount = RM10 000.00 Amount of deposit in June (1st year) = RM10 000.00 + Interest received in the month 6 = RM10 000.00 + ( RM10 000.00 x 3.5% x ) 12 7 = RM10 000.00 + ( RM10 000.00 x ) 400 = RM10 175.00 Amount of deposit in December (1st year) = RM10 175.00 + Interest received 7 = RM10 175.00 + ( RM10 175.00 x ) 400 = RM10 353.06

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CHIN WYNN With the principal amount, the amount of deposit in June and December of the 1st year and June of the 2nd year, a number sequence could be formed as shown in the following. RM10 000.00, RM10 175.00, RM10 353.06, …… (G.P.) In order to calculate the amount Chandran will receive after three years in his fixed deposit account, geometric progression can now be used. a = RM 10 000.00 r = RM10 175.00 RM10 000.00 = 1.0175 T7 (T1 is the principal amount, T2 is the amount after June of the 1st year, T3 is the amount after December of the 1st year, … T7 is the amount after December of the 3rd year) T7 = 10 000 x ( 1.0175 )6 = RM11 097.02 Therefore, the result above has shown that the total amount Chandran will receive after 3 years is RM11 097.02. On top of that, Bakar earns an additional RM1 097.02 from the interest after keeping RM10 000 in his fixed deposit account without any withdrawal for three years.

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CHIN WYNN 1. (c) (ii) Compare and comment on the difference in interests received. If you were to invest RM10 000 for the same period of time, which fixed deposit account would you prefer? Give your reasons.

Comparisons between the interests received by Ang, Bakar and Chandran after three years The tables and calculations in the question 1 (c)(i) have shown that Ang, Bakar and Chandran received different amount of interests after three years under different rates of interest and renewal period of their fixed deposit accounts. To sum everything up, the following table is designed to compare the amount of interests received by Ang, Bakar and Chandran after three years.

Account owner

Interest rate per annum (%) 2.5

Period of renewal

Initial deposit (RM)

At the end of every month At the end of Bakar 3.0 10 000 every 3 months 11 097.02 At the end of Chandran 3.5 every 6 months Table 7: Comparisons between Ang’s, Bakar’s and Chandran’s fixed accounts after 3 years Ang

Amount of deposit after 3 years (RM) 10 778.00 10 938.07

Total interest received (RM) 778.00 938.07 1 097.02 deposit

By reading and analysing the data in the table above, it can be proven that Chandran receives the most amount of interest in his fixed deposit account after three years compared to the fixed deposit accounts owned by Ang and Bakar.

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CHIN WYNN Choice of fixed deposit account and reasoning Without a doubt, the preferred fixed deposit account of mine would be Chandran’s fixed deposit account if I were to invest RM10 000 for 3 years. One of the main reasons I would choose Chandran’s fixed deposit account is that the percentage of interest received after 3 years in Chandran’s account is higher than both Ang’s and Bakar’s fixed deposit account. To prove that the percentage of interest received after 3 years in Chandran’s account is the highest, let’s do some calculations. Percentage increase = Amount of deposit after 3 years – Initial deposit x 100% Initial deposit Percentage increase in Ang’s account after 3 years RM 10778.00 − 10000.00 = x 100% RM 10000.00 778.00 = x 100% 10000.00 = 0.0778 x 100% = 7.78% Percentage increase in Bakar’s account after 3 years RM 10938.07 − RM 10000.00 = x 100% RM 10000.00 RM 938.07 = x 100% RM 10000.00 = 0.093807 x 100% = 9.93807% Percentage increase in Chandran’s account after 3 years RM 11097.02 − RM 10000.00 = x 100% RM 10000.00 RM 1097.02 = x 100% RM 10000.00 = 0.109702 x 100% = 10.9702%

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CHIN WYNN As seen above, the percentage increase in Ang’s account after 3 years is the lowest among all the three accounts. On the other hand, the percentage increase in Bakar’s fixed deposit account is lower when compared with Chandran’s fixed account, but higher than Ang’s account. This is because the interest earned is more when the fixed deposit period is longer. The advantage of short period of renewable interest is that the money can be withdrawn during emergencies. The disadvantage is that less interest is earned. On the other hand, the advantage pf long period of renewable interest is that more interest is earned. However, the disadvantage is that if there is a need of money, interest will be lost if the fixed amount is withdrawn. Hence, by comparing the difference between the percentage increase in all the three accounts after three years, it is very clear that the Chandran’s fixed deposit account receives the highest percentage increase compared to the other two accounts. This is why I have chosen Chandran’s fixed deposit account over the other two accounts because of its high percentage of interest after three years despite the disadvantage since my objective is to gain the interest from my savings.

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CHIN WYNN Further Exploration 2. (a) When Chandran’s first child, Johan is born, Chandran invested RM300 for him at 8% compound interest per annum. He continues to invest RM300 on each of Johan’s birthday, up to and including his 18th birthday. What will be the total value of the investment in Johan’s 18th birthday?

Method 1: Listing and Manual Calculation Year Value of Investment (RM) 0 300.0000 1 624.0000 2 973.9200 3 1351.8336 4 1759.9803 5 2200.7787 6 2676.8410 7 3190.9883 8 3746.2674 9 4345.9688 10 4993.6463 11 5693.1380 12 6448.5890 13 7264.4761 14 8145.6342 15 9097.2849 16 10125.0677 17 11235.0731 18 (2 d.p.) 12433.88 Table 8: Value of investment on Johan

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Value of Investment against Year
14000

12433.8800 12000 11235.0731

Value of Investment (RM)

10000

10125.0677 9097.2849

8000

8145.6342 7264.4761 6448.5890

6000

5693.1380 4993.6463

4000

4345.9688 3746.2674 3190.9883 2676.8410 2200.7787 1759.9803 1351.8336 973.9200 624.0000 9 10 11 12 13 14 15 16 17 18

Graph 1: Value of 2000 Investment on Johan 0

1 2 3 4 5 6 7 8 Thus, the total value of investment on Johan’s 18th

Year

birthday is RM12 433.88.

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CHIN WYNN Method 2: Geometric Progression (G.P.) To fulfil the requirement of the question, we are to calculate the total value of the investment on Johan’s 18th birthday. The solution of this problem is by performing repetitive calculations. 1st year = = = = = = = = = = = = = = = = = = = = = RM300 + Interest received RM300 + ( RM300 x 8% ) RM300 + ( RM300 x 0.08 ) RM300 ( 1 + 0.08 ) RM300 x ( 1.08 ) RM300 x ( 1.08 RM300 x ( 1.08 RM300 x ( 1.08 RM300 x ( 1.08 RM300 x ( 1.08 RM300 x ( 1.08 RM300 x ( 1.08 RM300 x ( 1.08 RM300 x ( 1.08 RM300 x ( 1.08 RM300 x ( 1.08 RM300 x ( 1.08 RM300 x ( 1.08 RM300 x ( 1.08 RM300 x ( 1.08 RM300 x ( 1.08 )2 )3 )4 )5 )6 )7 )8 )9 )10 )11 )12 )13 )14 )15 )16 )17

2nd year 3rd year 4th year 5th year 6th year 7th year 8th year 9th year 10th year 11th year 12th year 13th year 14th year 15th year 16th year 17th year

18th year = =

RM300 x ( 1.08 )18 + Investment when Johan was 0 year old RM300 x ( 1.08 )18 + RM300

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CHIN WYNN Thus, to find the total value of the investment on Johan’s 18th birthday, it is necessary to use the geometric progression method. a = Investment when Johan was 0 year old = RM300
nd r = Investment in the 2 year Investment in the 1st year 2 = RM300 x ( 1.08 )

RM300 x ( 1.08 ) = 1.08
n Sn = a ( r – 1 ) r-1 19 S19 = 300 [ ( 1.08 ) – 1 ] 1.08 – 1 19 = 300 [ ( 1.08 ) – 1 ]

0.08 = RM12 433.88 (2 d.p.)

By using the method of calculation above, which is the “sum of the first nth terms, Sn of a geometric progression” method, we can finally determine the total value of investment on Johan’s 18th birthday. Noticeably, the result from the calculation has shown that the total value of investment on Johan’s 18th birthday is RM12 433.88.

34

CHIN WYNN 2. (b) If Chandran starts his investment with RM500 instead of RM300 at the same interest rate, calculate on which birthday will the total investment be more than RM25 000 for the first time.

Method 1: Listing and Manual Calculation Based on the question, the investment of Chandran has changed from RM300 to RM500. Year Value of Investment (RM) 0 500.0000 1 1040.0000 2 1623.2000 3 2253.0560 4 2933.3005 5 3667.9645 6 4461.4017 7 5318.3138 8 6243.7789 9 7243.2812 10 8322.7437 11 9488.5632 12 10747.6483 13 12107.4601 14 13576.0569 15 15162.1415 16 16875.1128 17 18725.1218 18 20723.1316 19 22880.9821 20 25211.4607 Table 9: Value of investment on Johan

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CHIN WYNN

Value of Investment against Year
30000

25000

25211.4607

22880.9821

Value of Investment (RM)

20723.1316

20000
18725.1218 16875.1128

15000

15162.1415 13576.0569 12107.4601

10000

10747.6483 9488.5632 8322.7437 7243.2812 6243.7789 5318.3138 4461.4017 3667.9645 2933.3005 2253.0560 1623.2000 1040.0000 500.0000

5000

0

Hence, the total investment will be more than RM25 000.00 for the first time on Johan’s 20th birthday and this includes the RM500.00 invested on his 20th birthday.

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Year
Graph 2: Value of Investment on Johan

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CHIN WYNN Method 2: Geometric Progression (G.P.) The question requires us to calculate on which birthday will the total investment be more than RM25 000 for the first time if Chandran starts his investment with RM500 instead of RM300 at the same rate of interest. Since the only change in the investment in this question compared to the ones in the previous question is the value of investment on every Johan’s birthday, we can still use the “sum of the first nth terms, Sn of a geometric progression” method (refer to the solution of the previous question) to calculate the total value of investment on a specific year. However, the only change to the formulae is to modify the value of a to RM500 instead of RM300 because this question states that Chandran starts his investment with RM500 instead of RM300. The value of r remains the same because there is no difference in the rate of interest between both the questions. a = RM500 r = 1.08 Therefore, the new formula for calculating the total value of investment on a specific year in this question is shown in the following.
n Sn = 500 [ ( 1.08) – 1 ] 1.08 - 1

To fulfil the requirement of the question, we are supposed to calculate on which birthday will the total investment be more than RM25 000 for the first time if Chandran starts his investment with RM500 instead of RM300 at the same rate of interest. 500 [ ( 1.08)n – 1 ] 1.08 – 1 500 [ ( 1.08)n – 1 ] 0.08 500 [ ( 1.08 )n – 1 ] ( 1.08 )n – 1 4 n ( 1.08 ) 5

  

25 000 25 000 2000

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CHIN WYNN Until this stage, the value of n needs to be determined to find out on which birthday will have the total investment of more than RM25 000 for the first time. For that reason, logarithm method is used to work out the value of n. lg 1.08n lg 5 n lg 1.08 lg 5 lg 5 n lg 1.08 n 20.91 (4 s.f.) n = 21

 

 

Although n = 21, the first year is when Johan is 0 year old. Therefore, the total investment will be more than RM25 000.00 for the first time on Johan’s 20th birthday.

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CONCLUSION
Checking Answers (Method: Reverse Calculation) Question 1(a) Ang’s total income at the end of the 1st year = RM24 000.00 RM 24000.00 Ang’s salary per month = 12 = RM2 000.00 Bakar’s total income at the end of the 1st year = RM18 600.00 Using the arithmetic progression method, Let a be the commission Bakar received for the 1st month. d = RM100.00 n = 12 n Sn = [ 2a + ( n – 1 ) d ] 2 12 18 600.00 = [ 2a + 11 ( 100.00 ) ] 2 3100.00 = 2a + 1100.00 2a = 2000.00 a = RM1000.00 Chandran’s total income at the end of the 1st year = RM25 749.27 Using the geometric progression method, Let a be the profit Chandran earned for the 1st month. r = 150% = 1.5 n = 12 Sn = a ( rn – 1 ) r–1 25 749.27 = a [ ( 1.5 )12 – 1 ] 1.5 – 1 12 874.635 = a [ ( 1.5 )12 – 1] a = RM100.00

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CHIN WYNN Question 1(b) Percentage change in Ang’s total incomes = +10% Ang’s total income at the end of the 1st year = RM24 000.00 Let Ang’s total income at the end of the 2nd year be x. x – 24 000.00 = 10% 24 000.00

x = ( 0.1 x 24 000.00 ) + 24 000.00 x = RM26 400.00

Ang’s total income at the end of the 2nd year = RM26 400.00 RM 26400.00 Ang’s salary per month = 12 = RM2 200.00 Percentage change in Bakar’s total incomes = +14.52% Bakar’s total income at the end of the 1st year = RM18 600.00 Let Bakar’s total income at the end of the 2nd year be y. y – 18 600.00 = 14.52% 18 600.00 y = ( 0.1452 x 18 600.00 ) + 18 600.00 y = RM21 300.72 Bakar’s total income at the end of the 2nd year = RM21 300.72, which is approximately same as the answer in the strategy, that is RM21 300.00. Using the arithmetic progression method, Let a be the commission Bakar received for the 1st month. d = - RM50.00 n = 12 n Sn = [ 2a + ( n – 1 ) d ] 2 12 21 300.00 = [ 2a + 11 ( - 50.00 ) ] 2 3550.00 = 2a – 550.00 2a = 4100.00 a = RM2 050.00 The answer is the same as the commission Bakar received for the 1st month, which is also RM2 050.00. Thus, it is proven.

40

CHIN WYNN Percentage change in Chandran’s total incomes = +116.94% Chandran’s total income at the end of the 1st year = RM25 749.27 Let Chandran’s total income at the end of the 2nd year be z. z – 25 749.27 = 116.94% 25 749.27 z = ( 1.1694 x 25 749.27 ) + 25 749.27 z = RM55 860.47 Chandran’s total income at the end of the 2nd year = RM55 860.47, which is approximately same as the answer in the strategy, that is RM55 861.29. Using the geometric progression method, Let a be the profit Chandran earned for the 1st month. r = 90% = 0.9 n = 12 Sn = a ( 1 - rn ) 1-r 55 861.29 = a [ 1 - ( 0.9 )12 ] 1 – 0.9 5 586.129 = a [ 1 – ( 0.9 )12 ] a = RM7 784.78 The answer is the same as the profit Chandran earned in the 1st month, which is also RM7 784.78. Thus, it is proven.

Question 1(c)(i) Total amount received by Ang = RM10 778.00 Using the geometric progression method, Let a be the initial principal amount. 1 r = 1 + ( 2.5% x ) 12 481 = 480 n = 37 (36 months and the first term, which is the initial principal amount) Tn = arn-1 481 36 10 778.00 = a ( ) 480 a = RM10 000.00

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CHIN WYNN Total amount received by Bakar = RM10 938.07 Using the geometric progression method, Let a be the initial principal amount. 3 r = 1 + ( 3% x ) 12 403 = 400 n = 13 (12 months and the first term, which is the initial principal amount) Tn = arn-1 403 12 10 938.07 = a ( ) 400 a = RM10 000.00 Total amount received by Chandran = RM11 097.02 Using the geometric progression method, Let a be the initial principal amount. 6 r = 1 + ( 3.5% x ) 12 407 = 400 n = 7 (6 months and the first term, which is the initial principal amount) Tn = arn-1 407 6 11 097.02 = a ( ) 400 a = RM10 000.00 Further Exploration Question 2(a) Total value of investment on Johan’s 18th birthday = RM12 433.88 Using the geometric progression method, Let a be the money invested when Johan was born. r = 108% = 1.08 n = 19 ( Johan’s 18 birthday, including the year when Johan was born) Sn = a ( rn – 1 ) r-1 12 433.88 = a [ ( 1.08 )19 – 1 ] 1.08 - 1 994.7104 = a [ ( 1.08 )19 – 1 ] a = RM300.00
th

42

CHIN WYNN Question 2(b) The total investment will be more than RM25 000.00 for the first time on Johan’s 20th birthday. Using the geometric progression method, Let a be the money invested when Johan was born. r = 108% = 1.08 a = RM500.00 Sn = a ( rn – 1 ) r–1 S21 = 500.00 [ ( 1.08 )21 – 1 ] 1.08 – 1 = RM25 211.46 If n = 20, S20 = 500.00 [ ( 1.08 )20 – 1 ] 1.08 – 1 = RM22 880.98 Thus, the total investment will be more than RM25 000.00 for the first time on Johan’s 20th birthday. n = 21 ( Johan’s 20 birthday, including the year when Johan was born)
th

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CHIN WYNN Results Question 1(a) Ang’s income at the of the 1st year = RM24 000.00 Bakar’s income at the end of the 1st year = RM18 600.00 Chandran’s income at the end of the 1st year = RM25 749.27 Question 1(b) Ang’s income at the end of the 2nd year = RM26 400.00 Bakar’s income at the end of the 2nd year = RM21 300.00 Chandran’s income at the end of the 2nd year = RM55 861.29 Percentage change in Ang’s total incomes = +10% Percentage change in Bakar’s total incomes = +14.52% Percentage change in Chandran’s total incomes = +116.94% The change is positive for all 3 of them. Ang has the least increase by a fixed amount of 10%. Chandran’s income increase higher than Bakar’s income because his increase is by geometric progression, whereas Bakar’s income increase is by arithmetic progression. Question 1(c)(i) Total amount received by Ang = RM10 778.00 Total amount received by Bakar = RM10 938.07 Total amount received by Chandran = RM11 097.02 Question 1(c)(ii) I have chosen Chandran’s fixed deposit account over the other two accounts because of its high percentage of interest after three years despite the disadvantage of losing the interest if the fixed deposit is withdrawn since my objective is to gain the interest from my savings. Further Exploration Question 2(a) Total value of investment on Johan’s 18th birthday = RM12 433.88 Question 2(b) The total investment will be more than RM25 000.00 for the first time on Johan’s 20th birthday.

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CHIN WYNN Generalisation A fixed deposit account of RM10 000 for 3 years without any withdrawal will earn a higher interest if the investment plan offers a higher interest rate per annum. The best example is Chandran, who received the highest total amount of money after 3 years. Besides that, income which increases by geometric progression experience greater increase compared to arithmetic progression. Finally, parents should invest some money when their children are born, like Chandran. From the example, although Chandran invested a small amount of money only (RM300.00), the outcome after 19 years is RM12 433.88. If he invested more, the outcome would be greater some more. Hence, the money could be used for children’s education like furthering their studies in overseas.

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CHIN WYNN

ATTACHMENT

Document 1: Rubric for Additional Mathematics Project Work 2007

46

CHIN WYNN

Document 2: Guidelines for the Implementation of Additional Mathematics Project Work

47

CHIN WYNN

APPENDIX
1.

2.

3.