Question

Patricia is investing money. She has $30,000.00 to invest for 25 years. She can choose either simple interest at 1.2% interest, or compound interest at 1.2% interest, compounded annually.

Which is the better investment?
A.
A compound interest investment would be better, because Patricia would earn $10,423.51 in compound interest.

B.
A compound interest investment would be better, because Patricia would earn $9,000.0000000000.00 in compound interest.

C.
A simple interest investment would be better, because Patricia would earn $10,423.51 in simple interest.

D.
A simple interest investment would be better, because Patricia would earn $9,000.0000000000.00 in simple interest.

Answer 1

$30,000.00 to invest for 25 years. She can choose either simple interest at 1.2% interest, or compound interest at 1.2%

30,000 * 1.012^25 = 30,000* 1.34745 = 40,423.51
which is 10,423.51 in interest

That is indeed A