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A bank offers two special high-interest savings accounts if you deposit $500 and leave it untouched for 10 years. One pays 6 percent simple interest. The other pays 5 percent compound interest. Which one
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A bank offers two special high-interest savings accounts if you deposit $500 and leave it untouched for 10 years. One pays 6 percent simple interest. The other pays 5 percent compound interest. Which one is better and why? *

User Ashish Beuwria
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1 Answer

2 votes

Answer:

The compound interest one is better by about 14 bucks.

Explanation:

Simple interest:

500(1+.06*10)=800

Compound interest:

500(1+.05)¹⁰=814.45

User Homen
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