cole has $1,750 to invest. his bank offers two different types of accounts to choose from. cole will not…

cole has $1,750 to invest. his bank offers two different types of accounts to choose from. cole will not make any additional deposits or withdrawals. which account will earn the most interest at the end of 3 years? account i - cole will deposit $1,750 - earns 2.5% annual simple interest account ii - cole will deposit $1,750 - earns 4% interest compounded annually

cole has $1,750 to invest. his bank offers two different types of accounts to choose from. cole will not make any additional deposits or withdrawals. which account will earn the most interest at the end of 3 years? account i - cole will deposit $1,750 - earns 2.5% annual simple interest account ii - cole will deposit $1,750 - earns 4% interest compounded annually

Answer

Answer:

Account II

Explanation:

Step1: Calculate simple - interest for Account I

The simple - interest formula is $I = Prt$, where $P=$1750$, $r = 0.025$ (2.5% as a decimal), and $t = 3$ years. $I_1=1750\times0.025\times3=$131.25$

Step2: Calculate compound - interest for Account II

The compound - interest formula is $A=P(1 + r)^t$, where $P = 1750$, $r=0.04$ (4% as a decimal), and $t = 3$ years. $A = 1750\times(1 + 0.04)^3=1750\times1.04^3=1750\times1.124864=$1968.518$ Interest $I_2=A - P=1968.518-1750=$218.518$

Step3: Compare the interests

Since $218.518>131.25$, Account II earns more interest.