Account Y would earn Monica about $62.70 more interest than account X.
Given Monica deposits $3000.
Bank offers two different savings accounts.
Account X pays 2.1% simple annual interest and Account Y pays 2.4% compounded annually, both for 5 years.
For account X, we have:
Principal (P) = $3000
time (t) = 5 years
rate of interest (r) = 2.1%
we need to calculate simple interest:
Simple interest = P×t×r/100
= 3000c5×2.1/100
= $315
simple interest for 5 years is $315
For account Y, we have:
Principal (P) = $3000
time (t) = 5 years
rate of interest (r) = 2.4%
we need to calculate Compound interest:
compound interest = P×(1₊rate)^time ₋ P
= 3000(1₊2.4/100)⁵ ₋ 3000
= 3000(1.024)⁵ ₋ 3000
= 3000(1.12589907) ₋ 3000
= 3377.69 ₋ 3000
= $377.69
The compound interest for 5 years is $377.7
compound interest of account Y ₋ simple interest of account X
= 377.7 ₋ 315
= $62.70
hence the right option is that account Y would earn Monica about $62.70 more interest than account X.
Learn more about Compound interest here:
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Your question is incomplete.Please find the missing content below.
Monica wants to open a savings account with a deposit of $3000. Monica will not make any additional deposits or withdrawals after she opens the account. Her bank offers two different savings accounts. Account X pays 2.1% simple annual interest. Account Y pays 2.4% interest compounded annually. Which statement about these accounts at the end of 5 years is true?
Account X would earn Monica about $62.70 more interest than Account Y.
Account Y would earn Monica about $62.70 more interest than Account X.
Account X would earn Monica about $45.00 more interest than Account Y.
Account Y would earn Monica about $45.00 more interest than Account X.
