Question

Jane and Sammie are making decisions about their bank accounts. Jane wants to deposit

$550 as a principal amount, with an interest of 5% compounded quarterly. Sammie wants to
deposit $550 as the principal amount, with an interest of 7% compounded monthly. Explain
which method results in more money after 10 years. Show all work. (10 points)

Answer 1

Sammie

Explanation:

Jane

First, convert R as a percent to r as a decimal

r = R/100

r = 5/100

r = 0.05 rate per year,

Then solve the equation for A

A = P(1 + r/n)nt

A = 550.00(1 + 0.05/4)(4)(10)

A = 550.00(1 + 0.0125)(40)

A = $903.99

Sammie

First, convert R as a percent to r as a decimal

r = R/100

r = 7/100

r = 0.07 rate per year,

Then solve the equation for A

A = P(1 + r/n)nt

A = 550.00(1 + 0.07/12)(12)(10)

A = 550.00(1 + 0.005833333)(120)

A = $1,105.31