Neymar has $3,000 to invest and is choosing between two accounts. One account offers simple interest at a 3.5% annual rate, while the other offers compound interest at a 3% annual rate, compounded annually. He plans to invest for 6 years. Which account will give Neymar a higher balance after 6 years? Compound Interest Formula: A=P(1+(r)/(n))^nt Simple Interest Formula: A=P(1+rt)
Answer
A
Both accounts will provide the same balance
B
The Compound Interest Account
C
The Simple Interest Account
D
More information is needed to decide
Explanation
The simple-interest balance is $3,000 × (1 + 0.035 × 6) = $3,630. The compound-interest balance is $3,000 × (1.03)^6, which is about $3,582. Because $3,630 is higher, the Simple Interest Account gives Neymar the greater balance.
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