Question

Blanche has recently inherited $8000 which she wants to deposit into a savings account. She has determined that her two best bets are an account that compounds annually at an annual rate of 5.1% and an account that compounds quarterly at an annual rate of 3.1%. Which account would pay Blanche more interest?​

Answer 1

Answer:

The first account will give more interest after one year.

Step-by-step explanation:

Blanche has to invest $8000 in a saving account.

(i) One account gives a 5.1% annual interest compounded annually.

So, after one year she will get an interest of $\frac{5.1 \times 8000}{100} =408$ dollars

(ii) In another account gives 3.1% annual interest compounded quarterly.

So, the quarterly interest is $\frac{3.1}{4}=0.775$%.

Hence, after one year she will get an interest of $8000[1+\frac{0.775}{100} ]^{4}-8000 = 250.9$ dollars (Approximate)

Therefore, the first account will give more interest after one year.