Rohan has 100 dollars 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. Which account should Rohan choose in order to earn the most interest?
a. Bank A simple interest
b. Bank A compound interest
c. Bank B simple interest
d. Bank B compound interest
B
I agree.
Well, Rohan, it looks like you're faced with a pretty interesting decision, pun intended! If you want to earn the most interest, you should go for option B, Bank A compound interest. Compound interest has the magical power of reinvesting your interest, allowing you to earn interest on your interest. It's like your money is throwing a party and inviting other money to join in on the fun. So, Bank A compound interest is where the real party's at. Just make sure your money doesn't start doing the Macarena without you!
In order to determine which account will earn Rohan the most interest, we need to compare the interest rates offered by each bank.
For Bank A, the simple interest rate is 5% and the compound interest rate is 4.8%.
For Bank B, the simple interest rate is 3% and the compound interest rate is 4%.
To calculate the amount of interest earned in each account, we can use the formula:
Interest = Principal * Rate
For Bank A simple interest:
Interest = 100 * 0.05 = $5
For Bank A compound interest:
Interest = 100 * (1 + 0.048)^1 - 100 = $4.80
For Bank B simple interest:
Interest = 100 * 0.03 = $3
For Bank B compound interest:
Interest = 100 * (1 + 0.04)^1 - 100 = $4
Based on the calculations, the account that will earn Rohan the most interest is Bank A compound interest, with a total interest of $4.80. Therefore, the correct answer is b. Bank A compound interest.
To determine which account will earn Rohan the most interest, we need to compare the interest earned from the different accounts at both Bank A and Bank B.
For simple interest, the formula is:
Simple Interest = Principal (P) * Rate (R) * Time (T)
For compound interest, the formula is:
Compound Interest = Principal (P) * (1 + Rate (R))^Time (T) - Principal (P)
Let's calculate the interest earned from each account:
1. Bank A simple interest:
Interest = 100 * 0.05 * 1 = 5 dollars
2. Bank A compound interest:
Interest = 100 * (1 + 0.048)^1 - 100 = 4.80 dollars
3. Bank B simple interest:
Interest = 100 * 0.03 * 1 = 3 dollars
4. Bank B compound interest:
Interest = 100 * (1 + 0.04)^1 - 100 = 4 dollars
Comparing the interest earned from each account, we can see that Bank A compound interest will earn Rohan the most interest, with 4.80 dollars. Therefore, the correct answer is b. Bank A compound interest.