To determine which account Rohan should choose in order to earn the most interest, we need to calculate the amount of interest he would earn in each account.
For Bank A's simple interest account:
Interest = Principal x Rate x Time
Interest = $100 x 0.05 = $5 per year
For Bank A's compound interest account:
Interest = Principal x (1 + Rate)^Time - Principal
Interest = $100 x (1 + 0.048)^1 - $100
Interest = $100 x 1.048 - $100
Interest = $4.80 per year
For Bank B's simple interest account:
Interest = Principal x Rate x Time
Interest = $100 x 0.03 = $3 per year
For Bank B's compound interest account:
Interest = Principal x (1 + Rate)^Time - Principal
Interest = $100 x (1 + 0.04)^1 - $100
Interest = $100 x 1.04 - $100
Interest = $4 per year
Therefore, Rohan should choose option b. Bank A Compound interest account in order to earn the most interest.
Rohan has $100.00 that he wants to save in a bank. Bank A Offers two types of savings accounts. One has a 5% 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 in 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?
a. Bank A Simple interest account
b. Bank A Compound interest account
c. Bank B Simple interest account
d. Bank B Compound interest account
1 answer