Question

who had the higher rate of interest someone who earned 400$ over 2 years on 4000$ investment or someone who earned 960$ interest over 4 years on her 6000$ investment?

If I calculated correctly the person that earned 400$ over 2 years on a 4000$ investment. their interest earned was 5%
for the person who earned 960$ over 4 years on a 6000$ investment. their interest was 1.5
Am I correct, or what am I doing wrong ?

Answer 1

I am not certain how the 960 was paid, so I will assume it was paid at the end.

6960=6000(1+i)^4
which brings i to be 3.78 percent.

check me.

for the other, I get 4.88 percent

I made no assumptions about compounding.

Answer 2

thank you Bob, I am sure you are correct but I will check just so I can understand it for next time. Thanks