Question

The owners of a company want to invest $12000 for 4 years.a which account should they choose.Explain

account a earns 5% simple interest
account b earns 5% interest compound annually​

Answer 1

Compound interest

Explanation:

Simple interest in 4 years = 5% *4 = 20%

Compound interest in 4 years = 1.05^4 - 1 = 21.55%

Compound interest is higher than simple interest in any case more than 1 year