You have $100 to deposit. Bank A offers 20% simple interest, Bank B offers 15% interest compounded annually. How many years would you have to keep your money in the bank for Bank B to be a better choice than Bank A?

Question

Quizplus · Accepted Answer

For Bank A, with simple interest, the interest is $100 * 20% = $20 per year. For Bank B, with compound interest, the formula is $100 * (1 + 0.15)^n. After 5 years, Bank A gives $200, and Bank B gives $201.14, making Bank B better after 5 years.

You Have $100 to Deposit