Question

Meera has been visiting banks all day trying to find the best compound interest rate for her savings account. The banks have decided that instead of telling her their rate, they are going to give her the equation that will calculate her current balance after t years. Below are the equations each bank gave to Meera, where f(t) is the balance after t years and P is the principal amount to be placed in the savings account. Select the equation of the bank that has the greatest compound interest rate. Select one:

A. f(t) = P(1.07)t
B. f(t)= P(1.03)2t
C. f(t) = P(1.02)4t
D. f(t) = P(0.90)t

Answer 1

Answer: C.

f(t) = P(1.02)4t

Explanation:

f(t) = P(1.02)4t will have the greatest compound interest because the interest is on quarterly bases with an increment of 1.02 and the rate of 8%

Note : 8/100 × 1/4 = 0.02

There is no increment in D and A is yearly based. Option C is for 6 month.