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10-31.
  1. 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 ✎

    1. 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?

    2. 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.

    3. 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?