Question

Tommy earned $76.00 in interest after 5 years on a principal of $400. Jane earned $82.00 in interest after 2 years on a principal of $1,000. Which bank would you rather use, Tommy's or Jane's? Why?

Answer 1

The bank in which Jane has invested.

Explanation:

For Tommy's Bank:

P = $400

t = 5 years

I = $76

Simple interest formula is given by

`I=Prt\\\\76=400(r)5\\\\r=0.038\\\\r=3.8\%`

For Jane's Bank:

P = $1000

t = 2 years

I = $82

Simple interest formula is given by

`I=Prt\\\\82=1000(r)2\\\\r=0.041\\\\r=4.1\%`

Since, Jane's bank has higher interest rate. It means one can get higher interest if invest in this bank.

Therefore, we should prefer the bank in which Jane has invested.