Question

If you invested $500 at 5% simple interest for 2 years, how much interest do you earn? Show work and answer in complete sentences to earn full credit.
If you invest $500 at 3% compounded monthly for 2 years, how much interest you do earn? Show work and answer in complete sentences to earn full credit.




Which would you rather do?

Answer 1

The first investment can be shown as T=500*1.05^2 which is $551.25

The second investment can be shown as T=500*e^(0.03*12*2) which is $1027.22

So the second investment is better

Hope that helped!