Question

Tina is considering two compound interest account options as shown below. Which option yields the most interest? How much more?option, principal, p; interest rate, r; time, t; a, $500, 6 percent, 5 years. b, $500, 6.5 percent, 5 years.AnswerAOption A; $15.93BOption B; $15.93COption A; $12.50DOption B; $12.50

Answer 1

a, $500, 6 percent, 5 years

`A=500(1+0.06)^5\approx669.1128`

b, $500, 6.5 percent, 5 years

`B=500(1+0.065)^5\approx685.0433`

The option that yields most interest is option b, for $15.93:

`685.0433-669.1128\approx15.93`