Michael is planning to invest his 2,000 into a bank account between investment A with 8% simple interest or investment B with 6%

Question

3 years ago

6

Michael is planning to invest his 2,000 into a bank account between investment A with 8% simple interest or investment B with 6%

compound interest. He also plans to invest his money for 12 years. Which investment should be choose to get the biggest return

Mathematics

1 answer:

Angelina_Jolie [31] · Answer 1 · 2023-02-06T07:14:57+03:00

The investment with the bigger return is investment B.

<h3>What is simple interest and compound interest?</h3>

Simple interest rate is the interest that is paid only on the principal portion of a loan. This means that the debtor does not pays interest on the interest rate already accrued. This differs from compound interest where the debt holder pays interest on the principal and the interest rate already accrued

<h3>What is the compound interest?</h3>

The formula for calculating future value:

FV = P (1 + r)^n

FV = Future value
P = Present value
R = interest rate
N = number of years

2000 x (1.06)^12 = $4024.39

Compound interest = $4024.39 - $2000 = $2024.39

<h3>What is the simple interest? </h3>

Simple interest = principal x time x interest rate

2000 x 0.08 x 12 = $1920

To learn more about future value, please check: brainly.com/question/18760477