Question

Anastasia was trying to decide which investment plan would be best over 10 years. Bank A was offering 8.5% simple interest on her money using the formula I = P r t. Bank B was offering 8% compounded annually using the formula A = P (1 + r) Superscript t. Which bank is a better investment if she has $2,000 to invest for 10 years?
Bank A is the better investment. In 10 years, her $2,000 will grow to $4,317.85, and with bank B, her $2,000 will grow to $3,700.
Bank B is the better investment. In 10 years, her $2,000 will grow to $4,317.85, and with bank A, her $2,000 will grow to $3,600.
Bank A is the better investment. In 10 years, her $2,000 will grow to $4,521.97, and with bank A, her $2,000 will grow to $3,700.
Bank B is the better investment. In 10 years, her $2,000 will grow to $4,317.85, and with bank A, her $2,000 will grow to $3,700.

Answer 1

The bank that would be the best for Anastasia would be Bank B is the better investment. In 10 years, her $2,000 will grow to $4,317.85, and with bank A, her $2,000 will grow to $3,700. Option D is correct

How to solve for the best investment for Anastasia

To do this we have to solve for the compound interest of both of these banks.

For Bank A

2,000*1+0.085×10

=2000 + 1.85

= 3700

For bank B

2,000*(1+0.08)^10

= 2000 x 2.159

= 4,317.85

The investment from B is greater hence the correct answer is option D.

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