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

Step-by-step 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

$\Rightarrow P[1\frac{R}{100}]^t-P$

for 1 year it is

$\Rightarrow 600[1+\frac{1}{100}]-600=\ 6$

For bank R, simple interest is

$S.I.=\dfrac{P\times R\times T}{100}$

for 1 year it is

$\Rightarrow S.I.=\dfrac{600\times 1.5\times 1}{100}=\ 9$

Clearly, bank R offers more interest for 1 year