Question

henry wants to invest £4000 for 2 years. he can choose between two different banks.
BANK A: earns 3% per annum compound interest
BANK B: earns 3.2% per annum simple interest. each years interest is paid by cheque

Henry wants to earn as much interest on his investment as possible.
which bank should henry choose?

Answer 1

BANK B

Answer 2

could you tell me how you got it please :) like show your working

Answer 3

Formula for compound interest is
A=P(1+r/n)^(nt)
where "A" is the ending amount, "P" is the beginning amount (or "principal"), "r" is the interest rate (expressed as a decimal), "n" is the number of compoundings a year, and "t" is the total number of years.
Formula for simple interest is
I=Prt
where "I" is the simple interest, "P" is the beginning amount (or "principal"), "r" is the interest rate (expressed as a decimal), and "t" is the total number of years.

Answer 4

plug numbers and you will see that bank B is better choice.
Info from http://www.purplemath.com/modules/investmt.htm

Answer 5

thanks :)

Answer 6

you are welcome