Question

HELP

Patrick and Brooklyn are making decisions about their bank accounts. Patrick wants to deposit $300 as principal amount, with an interest of 3% compounded quarterly. Brooklyn wants to deposit $300 as the principal amount, with an interest of 5% compounded monthly. Explain which method results in more money after 2 years. Show all work.

Answer 1

Brooklyn's method results in more money after 2 years.

Step-by-step explanation:

To determine which method results in more money after 2 years, we can calculate the total future amount for both Patrick and Brooklyn's deposits.

For Patrick's deposit of $300 with a 3% interest compounded quarterly:

1. First, we convert the interest rate to a quarterly rate: 3% / 4 = 0.75%.
2. Next, we calculate the total future amount using the compound interest formula: $300 * (1 + 0.0075)^8 = $327.34.

For Brooklyn's deposit of $300 with a 5% interest compounded monthly:

1. First, we convert the interest rate to a monthly rate: 5% / 12 = 0.4167%.
2. Next, we calculate the total future amount using the compound interest formula: $300 * (1 + 0.004167)^24 = $331.97.

Therefore, Brooklyn's method results in more money after 2 years, with a total future amount of $331.97.