To determine which option will earn the most interest per year when compounded annually, we need to calculate the final amount for each option.
a. interest rate of 6.00% per annum, invested for 1 year:
Final amount = initial amount * (1 + interest rate)^time
Final amount = initial amount * (1 + 6/100)^1
Final amount = initial amount * 1.06
b. interest rate of 5.00% per annum, invested for 2 years:
Final amount = initial amount * (1 + interest rate)^time
Final amount = initial amount * (1 + 5/100)^2
Final amount = initial amount * 1.1025
c. interest rate of 3.00% per annum, invested for 4 years:
Final amount = initial amount * (1 + interest rate)^time
Final amount = initial amount * (1 + 3/100)^4
Final amount = initial amount * 1.1255
d. interest rate of 4.00% per annum, invested for 3 years:
Final amount = initial amount * (1 + interest rate)^time
Final amount = initial amount * (1 + 4/100)^3
Final amount = initial amount * 1.1256
Comparing the final amounts:
a. final amount = initial amount * 1.06
b. final amount = initial amount * 1.1025
c. final amount = initial amount * 1.1255
d. final amount = initial amount * 1.1256
Based on these calculations, Option D with an interest rate of 4.00% per annum, invested for 3 years, will earn the most interest per year.
When investing money that is compounded annually, which of the following options will earn the most of interest per year?
a. interest rate of 6.00% per annum, invested for 1 year
b interest rate of 5.00% per annum, invested for 2
years
C interest rate of 3.00% per annum, invested for 4 years
D interest rate of 4.00% per annum, invested for 3 years
1 answer
1 answer