Question

Patrick and Brooklyn are making decisions about their bank accounts. Patrick wants to deposit $300 as a principle amount, with an interest of 3% compounded quarterly. Brooklyn wants to deposit $300 as the principle amount, with an interest of 5% compounded monthly. Explain which method results in more money after 2 years. Show all work.

Answer 1

For this we will use formula that is letting us to input: interest rate, starting funds, how often intereset rate is implemented, period we are observing. Formula looks like this:

$M = S(1+ \frac{i}{cp})^cp*y$

where M is money, S is starting funds, "i" is interest rate, cp is compounding period and y is number of years. now we express and calculated for both of them and get

M = 318,479 for Patricks investement.

M = 331,482 for Brooklyn.

Which means Brooklyn's method will pay of more.

Answer 2

The equation is F=p(1+i/k)^kt 300(1+0.03/4)^4*2=318.48.. Your turn,,can you?