### Home > ACC7 > Chapter cc310 > Lesson cc310.1.2 > Problem 10-31

Tim wants to invest some money that his grandmother gave him. He has $2000 and can put it in an account with simple interest or an account with compound interest. Homework Help ✎

The simple interest account has an interest rate of 10%. With this interest rate, what is the total amount in the bank after 5 years?

The compound interest account is also for 5 years (compounded yearly), but it has an interest rate of 8%. Find the total amount that he would have in this account.

Which account is a better investment?

Add the interest he earns to his initial principal to find the total amount he would have after 5 years.

*I* = ($2000)(.1)(5 years)*I* = $1000

Total = $2000 + $1000 = $3000

*A* = 2000(1 + 0.8)^{5}

(1.08)^{5} = 1.469

*A* = $2000 (1.469) = $2938.66

Which account has more money after 5 years?