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Three friends decide that they each want to be able to buy a new bike in four years.
Iliana puts $500 in a savings account with a simple interest rate of 4%.
Joann invests $515 in a standard savers account with a simple interest rate of 3%. Cyndy invests $500 in a junior achievers account with a 3.5% compound interest rate.
Using the formula I=Prt for simple interest and A=P(1+r)^t for compound interest, who will have the most money to spend on a new bike at the end of the four years?

1. Joann will have the most money, $576.80 for the bike
2. Cyndy will have the most money, $580.00 for the bike.
3. Cyndy will have $576.80, the most money for the bike.
4. Iliana will have $580.00, the most money for the bike.

Respuesta :

stefanymogas2005

Answer:

Last choice

D. Iliana will have $580.00, the most money for the bike.  

Step-by-step explanation:

I took the test and made sure that it's right.

anuksha0456

Iliana will have the most money among the three friends, $580, so the 4th option is the right choice.

What do we mean by Interest on a sum of money?

When we invest our money, we expect some returns on it. This return is called Interest.

Interests are of two types:

  • Simple Interest: When the returns are calculated only on the initial invested sum, it is called Simple Interest.
  • Compound Interest: When the returns are calculated on the initial investment along with the periodic interests earned in the prior periods is called Compound Interest.

How do we solve the given question?

We are given three cases, solving for each at a time we get:

Solving for Iliana's investment:

Investment(P) = $500, Rate(r) = 4%, Time(t) = 4 years Type: Simple Interest

Interest I = Prt = 500*4*4/100 = $80

∴ Amount received after 4 years = Investment + Interest = $500 + $80 = $580

Solving for Joann's investment:

Investment(P) = $515, Rate(r) = 3%, Time(t) = 4 years Type: Simple Interest

Interest I = Prt = 515*3*4/100 = $61.80

∴ Amount received after 4 years = Investment + Interest = $515 + $61.80 = $576.80

Solving for Cyndy's investment:

Investment(P) = $500, Rate(r) = 3.5%, Time(n) = 4 years Type: Compound Interest

∴ Amount received after 4 years = P(1+r)ⁿ = 500(1 + 0.035)⁴ = 500*1.035⁴ = 500 * 1.147523 = 573.76

∴ Amount received after 4 years = $573.76

∴ Iliana will have $580, Joann will have $576.80, and Cyndy will have $573.76.

∴Iliana has the most money $580.

Now going by the given options we can say that the right option is 4.

Learn more about Simple and Compound Interest at

https://brainly.com/question/3575751

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