Question

Liam invests $3,670 in a savings account at his local bank which gives 1.9% simple annual interest. He also invests $2,040 in an online savings account which gives 5.5% simple annual interest. After five years, which one will have earned more interest, and how much more interest will it have earned, to the nearest dollar?

Answer 1

Step-by-step explanation:

Given:

• Investment P₁ = $3670
• Investment P₂ = $2040
• Rate of interest r₁ = 1.9% SI
• Rate of interest r₂ = 5.5% SI
• Time t = 5 years

Find amount of interest in both investments:

• I₁ = P₁r₁t = $3670*(1.9/100)*5 = $348.65
• I₂ = P₂r₂t = $2040*(5.5/100)*5 = $561.00

As we see the online savings account earns more interest and the difference is:

• $561.00 - $348.65 = $212.35 ≈ $212