Question

George wants to invest $20,000 One investment pays interest at a rate of 18 2/3% while another pays interest at a rate of 0.1872 which is the better investment?

Answer 1

Answer:

Investment with interest rate 0.1872 is better

Step-by-step explanation:

Given as :

George investment principal = $20,000

The Rate of interest  (R1)   = 18 $\frac{2}{3}$ % = $\frac{56}{3}$ %

I.e   R1 = 18.67 %

Again The The Rate of interest  (R2)  = 0.1872  = 18.72 %

Let the time period for both rate of interest = 1 years

Now from compound interest method

Amount = Principal × $(1 + \frac{Rate}{100})^{Time}$

Or,    A 1 = $ 20 , 000 × $(1 + \frac{18.67}{100})^{1}$

Or,    A 1 = $ 20 ,000 × 1.1867

∴       A 1 = $ 23,734

And   A 2 = $ 20 , 000 × $(1 + \frac{18.72}{100})^{1}$

Or,     A 2 = $ 20 ,000 × 1.1872

∴        A 2 = $ 23,744

Hence From the calculation of both amount it is clear that , investment with interest rate 0.1872 is better . Answer