Question

Rohan has $100.00 that he wants to save in a bank. Bank A offers two types of savings accounts. One has a 5% simple interest rate, and the other has a 4.8% compound interest rate. Bank B also offers two types of savings accounts. One has a 3% simple interest rate, and the other has a 4% compound interest rate.

Use the passage to answer the question.

Which account should Rohan choose in order to earn the most interest after leaving the account open for 5 years?

(1 point)

Bank A simple interest account


Bank A compound interest account


Bank B simple interest account


Bank B compound interest account

Answer 1

Bank A compound interest account.

Calculations:
- A simple: 100(1 + 0.05·5) = $125.00
- A compound: 100(1.048)^5 ≈ $126.42
- B simple: 100(1 + 0.03·5) = $115.00
- B compound: 100(1.04)^5 ≈ $121.67

The largest amount after 5 years is from Bank A’s 4.8% compound account.