Question

Monica deposit 300 into a savings account that pays a simple interest rate of 4.3% call deposit 400 and into the savings account that pays simple interest rate of 4.2% Monica says she warren more interest in one year because her interest rate is higher is she correct

Answer 1

No

Explanation:

MONICA:

Principal, p = 300

Simple interest, r = 4.3% = 0.043

CALL:

Principal, p = 400

Simple interest, r = 4.2% = 0.042

Amount, A received by each after one year :

Recall:

A = p(1 + rt) ; time, t = 1 year

MONICA:

A = 300(1 + 0.043(1))

A = 312.9

CALL = 400(1 + 0.042(1))

A = 416.8

Monica is incorrect, this is because amount earned is not only dependent on the interest rate but also the number of period and the initial or principal amount deposited.