Question

What would be the value of $100 after 10 years if you earn 11 percent interest per year?

Answer 1

`\left[\begin{array}{ccc}A&259.37\\B&283.94&Correct\\C&110.46\end{array}\right]`

Explanation:

`\left[\begin{array}{ccc}100(1+(0.11)/(12))^(10)  \end{array}\right] = \left[\begin{array}{ccc}100(2.8394)\end{array}\right] = \left[\begin{array}{ccc}283.94\end{array}\right]`

Answer 2

If the interest is simple interest, then the value is

100 [ 1 + (10 x 0.11) ] = 100 (1 + 1.1) = 100 x 2.1 = $210 .

If the interest is compound interest, and is compounded annually,
then the value is

100 (1 + 0.11)¹⁰ = 100 (2.8394) = $283.94 .


If the interest is compound interest, and is compounded monthly,
then the value is

100 (1 + 0.11/12)¹²⁰ = 100 (2.9891) = $298.91 .


That's why compound interest is better than simple interest.