Question

Tommy earned $19.00 in interest after 5 years on a principal of $100. Jane earned $64.80 in interest after 2 years on a principal of $900. Which bank would you rather use, Tommy's or Jane's? Explain your reasoning.

A. Tommy's bank because the interest rate is higher.
B. Jane's bank because it offers better interest over a shorter period.
C. Tommy's bank because it offers better interest over a longer period.
D. Jane's bank because it offers better interest over a longer period.

Answer 1

Tommy's bank offers a higher interest rate than Jane's bank, making it the preferable choice.

Step-by-step explanation:

To determine which bank would be preferable, we need to compare the amounts of interest earned by Tommy and Jane. Tommy earned $19.00 in interest after 5 years on a principal of $100, while Jane earned $64.80 in interest after 2 years on a principal of $900.

In order to compare the interest rates, we can calculate the interest rate using the formula Interest = Principal × Rate × Time. Rearranging the formula, we get Rate = Interest / (Principal × Time).

For Tommy, the interest rate would be $19.00 / ($100 × 5) = 0.038 or 3.8%. For Jane, the interest rate would be $64.80 / ($900 × 2) = 0.036 or 3.6%. Based on these calculations, Tommy's bank offers a higher interest rate, so the correct answer is option A, Tommy's bank because the interest rate is higher.