Question

Josh and Raheem both invest some money.

Josh invests £1200 at Banks’R’us, who pay 4% simple interest per year.
Raheem invests £1250 at Bank World who pay 3% compound interest per year.
They invest the money for 5 years.
Who has the most money in their account after 5 years?

;v;

Answer 1

Raheem

Explanation:

Josh :

using simple interest formula :

Final amount = P(1 + rt)

Final amount = 1200(1 + 0.04*5)

Final amount = 1200(1.2)

Final amount = £1440

Raheem :

Using compound interest formula :

Final amount = P(1 + r/n)^nt

Final amount = 1250(1 + 0.03)^5

Final amount = 1250(1.03)^5

Final amount = £1449.09

Raheem has more money