Question

George wants to invest $20,000 One investment pays interest at a rate of 18 2/3% while another pays interest at a rate of 0.1872 which is the better investment?

Answer 1

Investment with interest rate 0.1872 is better

Explanation:

Given as :

George investment principal = $20,000

The Rate of interest (R1) = 18
`(2)/(3)` % =
`(56)/(3)` %

I.e R1 = 18.67 %

Again The The Rate of interest (R2) = 0.1872 = 18.72 %

Let the time period for both rate of interest = 1 years

Now from compound interest method

Amount = Principal ×
`(1 + (Rate)/(100))^(Time)`

Or, A 1 = $ 20 , 000 ×
`(1 + (18.67)/(100))^(1)`

Or, A 1 = $ 20 ,000 × 1.1867

∴ A 1 = $ 23,734

And A 2 = $ 20 , 000 ×
`(1 + (18.72)/(100))^(1)`

Or, A 2 = $ 20 ,000 × 1.1872

∴ A 2 = $ 23,744

Hence From the calculation of both amount it is clear that , investment with interest rate 0.1872 is better . Answer