Question

One year ago, Lindsey deposited $250 into a savings account. Her balance is now $253. Two years ago, Jenn deposited $250 into a savings account. Her balance is now $257.50. Which account has the greater simple interest rate? Explain.

Answer 1

$257.50
because it have a higher amount

Answer 2

Jenns account has the greater simple interest rate

Explanation:

The formula for simple interest is:

`A=P*(1+r*t)`

Where A is the final amount after investment, P is the initial amount, r is the rate of interest and t is the time periods.

For Lindsey:

`253=250*(1+r*1)`

Solve for r

`r=(253/250)-1=0.012`

Lindsey simple interest was 1.2% annually

For Jenn:

`257.50=250*(1+r*2)`

`r=((257.50/250)-1)/2=0.015`

Jenn simple interest was 1.5% annually

Therefore Jenns account has the highest simple interest rate.