Question

Suppose you have some amount of money. In a bank, there are three types of accounts A, B and C. In account A, the simple interest rate is 12% p.a., in account B, the compound interest rate is 11% p.a. compounded annually and in account C, the compound interest rate is 10.75% p.a. compounded semi-annually. If you want to deposit the amount in the bank, in which account do you deposit and why?

PLEASE SHOW FULL PROCESS ​

Answer 1

Suppose $100 is invested in each of these three accounts. After one year:

Account A: $100(1.12) = $112

Account B: $100(1.11) = $111

Account C: $100(1 + (.1075/2))^2 = $110.04

Account A has the most money after one year, so the amount should be invested in account A.