You can put your $100 in Bank A that pays 8% at the end of the year.You can also put your $100 in Bank B that pays 4% at the end of six months and then 4% again at the end of the year.You will keep your $100 and all interest in the bank.At the end of the year
A) the total will be the same at both banks.
B) the total at Bank A will be greater.
C) the total at Bank B will be greater.
D) the total could be larger at either bank.

Question

Quizplus · Accepted Answer

If you put your money in Bank A, you will earn 8% interest at the end of the year, which means you will have $108 at the end of the year.

If you put your money in Bank B, you will earn 4% interest at the end of six months (which is half a year), which means you will have $104 at the end of six months. Then, you will earn another 4% interest at the end of the year, which means you will have $108.16 at the end of the year.

Therefore, the total at Bank B will be greater than the total at Bank A.

You Can Put Your $100 in Bank a That Pays