Question

Monica deposits $200 into a savings account that pays a simple interest rate of 4.4%. Paul deposits $300 into a savings account that pays a simple interest rate of 3.3%. Monica says that she will earn more interest in 1 year because her interest rate is higher. Is she correct? Justify your response.

Answer 1

Formula of simple interest rate:

`S\mathrm{}I=(P* R* T)/(100)`

Where,

`\begin{gathered} P=\text{ Principal} \\ R=\text{ Rate} \\ T=\text{ Time} \end{gathered}`

For Monica interest rate is:

`\begin{gathered} S\mathrm{}I\mathrm{}=(200*4.4*1)/(100) \\ =8.8 \end{gathered}`

For Paul interest rate is:

`\begin{gathered} S\mathrm{}I\mathrm{}=(300*3.3*1)/(100) \\ =3*3.3 \\ =9.9 \end{gathered}`

No, Paul interest rate higher then Monic.