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=Prt Bank B was offering 8% compounded annually using the formula A=P(1+r)^t. Which bank is a better investment if she has $2,000 to invest for 10 years?
A. 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.

B. 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.

C. 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.

D. 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

A
2,000×(1+0.085×10)
=3,700
B
2,000×(1+0.08)^(10)
=4,317.85
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