Anagrace has $200 to invest for 10 years. If her local bank pays 7% simple interest on an investment but a national bank pays 5% interest compounded annually, which is the better choice? How much money would she have after 10 years if she chose the local bank?

Question

Mathematics

Chana Huynh

5 February, 16:17

Anagrace has $200 to invest for 10 years. If her local bank pays 7% simple interest on an investment but a national bank pays 5% interest compounded annually, which is the better choice? How much money would she have after 10 years if she chose the local bank?

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Benjamin Hutchinson · Answer 1

Local bank: 7% simple interest, so A = amount = $200+$200*0.07*10 = $340

National bank: 5% interest comp. annually, so A = $200 (1.05) ^10 = $325.78

Anagrace would have accumulated $340 after ten years.