Q:

Three friends decide that they each want to be able to buy a new boat in five years. Vanore puts $1,000 in a savings account with a simple interest rate of 4.5%. Keir invests $1,200 in a standard savers account with a simple interest rate of 4%. Omar invests $950 in a junior achievers account with a 6% annual compound interest rate. Who will have the most money to spend on a new boat at the end of the five years? Use the formula mc019-1.jpg for simple interest and mc019-2.jpg for compound interest. Round to the nearest dollar.

Accepted Solution

A:
To get the answer, you have to find the simple interest and compound interest.
Simple Interest= Principal amount(1+rate x time)
Compound interest= Principal amount(1 + rate/number of months)^number of months x time
simple interest Vanore= 1000(1+ 0.045x5)
=1225 dollars
simple interest Keir= 1200(1+ 0.04x5)
=1440 dollars
compound interest Omar= 950(1+ 0.06/12)^12(5)
=1281 dollars

The answer is Keir having 1440 dollars.