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?

5 answers

Without even doing any calculation, since there is such a large difference in the interest rates, it should be obvious that the simple interest plan should be the better of the two.

check:
at simple interest
I = 2000(.13)(4) = 1040
so amount in your account = 3040

at compound interest:
amount = 2000(1.06)^4 = 2524.95

Unrealistic interest rates, time to get a new textbook

um that didn't help

thanks helped alot

That didn’t help

Answer beggers and thanks helped out reiny!