Question

A youth group has a yard sale to raise money for a charity. The group earns $800 but decides to put its money in the

bank for a while. Calculate the amount of money the group will have given the following scenarios:
c. If the youth group needs the money quickly, which is the better choice? Why?

Answer 1

Answer: A) $896 b) $927.42 c) Cool bank

Explanation:

A)

Cool bank Simple interest is 4% and the youth group leaves the money for 3 years. Therefore,

$800 x (4/100) x (3) = $96 (Interest gotten)

Therefore total funds = $800 + $86 = $896 in total.

B)

Hot bank simple interest is 3% and youth group leaves the money for 5 years. The fore

$800 (1.03)^5 = $927.42

C)

If the youth needs the money quickly, cool bank should be perfect because the bank pays higher interest rate than hot bank. Hot bank rates is better for a longer period of time due to compounding of interest