Question

Monica deposits $300 into a savings account that pays a simple interest rate of 4.2% paul deposits $400 into a savings account that pays a simple interest rate of 3.8% monica says that she will earn more interest in 1 year because her interest rate is higher is she correct?

Answer 1

Paul earned $2.6 more interest than Monica.

Explanation:

Giving the following information:

Monica:

Initial investment= $300

Interest rate= 4.2%

Paul:

Initial investment= $400

Interest rate= 3.8%

To calculate the income earned, we need to use the following formula:

I= P*r*t

P= principal

r= interest rate

t= time

Monica:

I= 300*0.042*1= $12.6

Paul:

I= 400*0.038*1= $15.2

Paul earned $2.6 more interest than Monica.