Question

SOME HELP PLS I HAVE TO SUBMIT IT IN 1M

Anita and Sarah both opened savings accounts with a starting balance of ₹20,000 on the same day. Anita’s bank is paying her using compound interest, but Sarah’s bank is paying her using simple interest. Both Anita and Sarah are receiving an interest rate of 10% annually. Who do you think will have more balance in two years?

Answer 1

Anita will have more balance in two years

Explanation:

Here, we want to know which of the two will earn better interests

we use the simple and compound interests formula to be sure of the actual values

For the simple interest;

I = PRT/100

I is the principal

R is the rate = 10%

T is time = 2 years

P is the deposit amount

The interest is thus;

I = (20,000 * 10 * 2)/100 = 4,000

The amount in the account after two years is thus;

4,000 + 20,000 = 24,000

For the compound interest

We have the formula as:

A = P( 1 + r/n)^nt

A is the amount which is the balance after 2 years

P is the deposit amount = 20,000

r is the interest rate = 10% = 10/100 = 0.1

n is the number of times per year the interest is compounded;

Since it is annually, the interest is compounded once per year

t is time which is 2 years

Substituting these values, we have it that;

P = 20,000( 1 + 0.1/1)^1(2)

P = 20,000(1.1)^2

P = 24,200

This shows that the compound interest value will earn better.

Hence, Anita will have more balance in two years