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16 August, 07:30

A bank offers two interest account plans. Plan A gives you 6% interest compounded annually. Plan B gives you 13% annual simple interest. You plan to invest $2,000 for the next 4 years. Which account earns you the most interest (in dollars) after 4 years? How much will you have earned?

Plan A; $524.95

Plan B; $524.95

Plan A; $1,040.00

Plan B; $1,040.00

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  1. 16 August, 07:36
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    Plan A

    The formula is

    A=p (1+r) ^t

    A=2,000 * (1+0.06) ^ (4)

    A=2,524.95 (future value)

    Interest earned=A-p

    Interest earned=2524.95-2000

    Interest earned=524.95

    Plan B

    Use the simple interest formula

    I=prt

    I interest earned?

    P principle 2000

    R interest rate 0.13

    T time 4years

    I=2,000*0.13*4

    I=1,040

    The Answer is

    Plan B; $1,040
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