brandonbing123
Answered

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1. (07.01 MC)
Harrison and Sherrie are making decisions about their bank accounts. Harrison wants to deposit $200 as a principle amount, with an
interest of 2% compounded quarterly. Sherrie wants to deposit $200 as the principle amount, with an interest of 4% compounded
monthly. Explain which method results in more money after 2 years. Show all work.

Sagot :

Cricetus

Answer:

"Compounded monthly" is the correct approach.

Step-by-step explanation:

Harrison,

Given that:

Principle,

P = $200

Interest rate,

R = 2%

Compounded quarterly,

R = [tex]\frac{1}{4}\times 2[/tex]

  = [tex]\frac{2}{4}[/tex]

After 2 years, the amount (A) will be:

= [tex]P(1+\frac{R}{100} )^n[/tex]

By putting the values, we get

= [tex]200\times (1+\frac{2}{400} )^{4\times 2}[/tex]

= [tex]200\times (1+\frac{2}{400} )^8[/tex]

= [tex]208.14[/tex] ($)

Sherrie,

Given that,

Principle (deposited),

P = $200

Interest rate,

R = 4%

After 2 years, the amount (A) will be:

= [tex]P(1+\frac{R}{100\times 12} )^{12\times 2}[/tex]

= [tex]200\times (1+\frac{4}{1200} )^{24}[/tex]

= [tex]216.628[/tex] ($)

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