Question

You have two investments to choose from. Investment A pays an interest rate of 5% for 2 years and Investment B pays an interest rate of 2% for 5 years. Given that you have $100 to invest and can only choose one investment (A or B), which one should you choose, A or B?

Answer 1

investment b

Step-by-step explanation:

The better investment option can be determined by finding the investment with the higher compound interest

Interest = principal x (1 + r) ^t

r = interest rate

t = time

Investment A = 100 x (1.05)^2 = $110.25

Investment B = 100 x (1.02)^5 = $110.41

Investment B has an higher amount and so should be chosen