Answer: Brooklyn will have more money after two years
She'll have 13 more dollars compared to Patrick.
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Explanation:
We'll be using this compound interest formula
A = P*(1+r/n)^(n*t)
The variables are:
- A = final amount at time t
- P = initial amount, aka deposit or principal
- r = decimal form of the annual interest rate
- n = number of times we compound the money per year
- t = number of years
Patrick has the following values:
- P = 300
- r = 0.03
- n = 4
- t = 2
which leads to...
A = P*(1+r/n)^(n*t)
A = 300*(1+0.03/4)^(4*2)
A = 318.479654345482
A = 318.48
Patrick will have $318.48 in his account after 2 years.
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For Brooklyn, she has:
- P = 300
- r = 0.05
- n = 12
- t = 2
Those values then plug into the formula to get...
A = P*(1+r/n)^(n*t)
A = 300*(1+0.05/12)^(12*2)
A = 331.482400667499
A = 331.48
Brooklyn will have $331.48 in her account after 2 years.
We can see that Brooklyn earns more compared to Patrick.
She has $331.48 - $318.48 = 13 more dollars compared to Patrick.
This is to be expected for two reasons:
- Her annual interest rate is higher (5% compared to 3%)
- The money in her account is compounded more frequently (12 times per year compared to 4 times per year)
