Question

Please help!!!

Harrison and Sherrie are making decisions on their bank accounts. Harrison wants to put more money in as a principle amount because the more you start with, the more interest you will gain. Sherrie wants to put the original money in an account with a higher interest rate. Explain which method will result in more money.

Answer 1

depends on the interest rates ...

Answer 2

B(1+i+k)^n = (B+d)(1+i)^n

if:

B/(B+d) = (1+i)^n/(1+i+k)^n

then your makeing the same exact amount of money per time frame

Answer 3

They don't give any numbers in this question. It makes it that much more confusing

Answer 4

numbers dont solve things, concepts do. numbers are for a specific individual instant in time; generalities cover broader scopes and situations

Answer 5

you have a starting amount B, and an interest rate i, and a time frame of n periods

B(1+i)^n is how much you are making at the moment, so modify it

B+d = more deposit

i+k = more interest

Answer 6

Okay...

Answer 7

when are they the same? when they equal each other of course

more deposit = higher interest

(B+d)(1+i)^n = B(1+i+k)^n then its basic math from there

Answer 8

so it depends in the amount deposited, and the interests involved. a case can be made either way depending in what the now specific situation provides

Answer 9

Would Harrison be correct overall?

Answer 10

neither of them are correct, or incorrect. But we have a way to determine it when we know their situation

Answer 11

we have developed a 'formula' that can be used as proof.

Answer 12

spose we start with 100 at 5% interest for 12 periods, and the guy says add 50; what interest rate does the wife need to find to win the deal?

Answer 13

B/(B+d) = (1+i)^n/(1+i+k)^n

100/150 = ((1+.05)/(1.05+k))^12

well we solve and find that this is equal when k is about 3.6%

if the wife finds an investment for 5+4 = 9% she wins, otherwise she loses.

Answer 14

I do not understand how that is relevant to the question

Answer 15

Explain which method will result in more money.

i just proved that the situation can go either way ...

Answer 16

the question isnt who wins ... the question is asking you to think about it and come up with a suitable process that can determine an outcome.

Answer 17

critical thinking skills they call it

Answer 18

Oh okay I get it. Thanks!

Answer 19

good luck