Question

The table represents a deposit of $1,000 in a savings account that pays 6% simple interest annually. Which statement BEST describes how the account grows?

Answer 1

Statement B: The account grows by $60 each year

The correct answer is Statement B: The account grows by $60 each year.

To calculate the growth of the account, we can use the formula for simple interest:

A = P(1 + r)^n

where:

A = the final amount (in this case, the balance after n years)

P = the principal amount (the initial deposit of $1,000)

r = the interest rate (6% in this case)

n = the number of years (1 year in this case)

Plugging in the values, we get:

A = $1,000(1 + 0.06)^1

A = $1,000(1.06)

A = $1,060

Therefore, the account grows by $60 each year, from $1,000 to $1,060.

Explanation:

Answer 2

Joyner Bank has a slightly higher annual interest rate of 2.3% than Ross Bank.

Investing in Joyner Bank looks to be the more advantageous option based on the facts supplied.

Determine Ross Bank's annual interest rate.

Given that Ross Bank pays $45 in simple interest on a $750 deposit over three years, the yearly interest rate is as follows:

Annual Interest Rate = (Total Interest Earned) / (Time Period Principal Amount).

Annual Interest Rate = $45 / (3 years = $750)

0.02 2% annual interest rate

Determine Joyner Bank's annual interest rate.

Given that Joyner Bank pays $23 in simple interest on a $1,000 account over a year, the annual interest rate may be calculated as follows:

(Total Interest Earned) / (Principal Amount Time Period) = Annual Interest Rate

Annual Interest Rate = $23 / (1 year $1,000)

2.3% annual interest rate = 0.023

Examine the annual interest rates.

Now that we've computed the annual interest rates for both banks, we can compare them to see which one is the better value.

Annual Interest Rate at a Bank

2% from Ross Bank

2.3% Joyner Bank

As you can see, Joyner Bank has a little higher annual interest rate of 2.3% than Ross Bank, which has a rate of 2%.

This means that Joyner Bank will earn somewhat more interest over time for a given deposit amount.

The following question may be like this:

The table shows how much simple interest a $1,000 deposit in a savings account at Joyner Bank will earn over time. The graph shows how much simple interests a $750 deposit in a savings account for 6 years. Which bank should he choose? Use mathematics to justify your reasoning.