Question

Karl is comparing the interest rates for accounts at two different banks. He will deposit $600 into an account and will not make any additional deposits or withdrawals. Bank Q offers 1% interest compounded annually. Bank R offers 1.5% simple interest.

Answer 1

Answer: bank R for 1 year

Explanation:

Given

Principal deposit is
`P=\$600`

Bank Q offers 1% interest compounded annually

Bank R offers 1.5% simple interest annually

For Bank Q, Compound interest is given by

`\Rightarrow P[1(R)/(100)]^t-P`

for 1 year it is

`\Rightarrow 600[1+(1)/(100)]-600=\$6`

For bank R, simple interest is

`S.I.=(P* R* T)/(100)`

for 1 year it is

`\Rightarrow S.I.=(600* 1.5* 1)/(100)=\$9`

Clearly, bank R offers more interest for 1 year