Simple interest = Principle x Rate x time
Simple interest = 1800 x 6.5% x 4 = 468.00
When compounded
Future value after 4 years will be
FV = PV x (1 + i)^n
http://www.tvmschools.com/formula/future...
FV = 1800 x (1 + 6%)^4
FV = 2,272.46
Interest = FV - PV = 2,272.46 -1800.00 = 472.46
So the second account pays more interest.
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yes
I have $1800 to invest for four years and have decided to deposit my money in the Super Duper Bank. If I choose the Gold account, I earn simple interest of 6.5% per annum, but I have to withdraw my interest earned at the end of each year. If I choose the Platinum account, I earn interest of 6% per annum but I will leave the interest earned during each year to be added to the principal each year, which means that my interest is compounded.
Which account should I put my money in? and why?
