Question

Lisa is choosing between two savings accounts. Both accounts pay 3% interest. Account X pays compound interest. Account Y pays simple interest. Lisa should choose account X because

Question 5 options:


it would pay interest on interest.


the interest would be tax free.


the interest rate would decrease over time.


the interest rate would increase over time.

Answer 1

The option 1 is the correct answer which is because it would pay interest on interest. Compound interest is better than the simple interest because compound interest will pay interest to interest. So Lisa most like to choose account x because It would pay interest on interest.