### Home > CC3MN > Chapter 10 > Lesson 10.1.1 > Problem10-12

10-12.

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.

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?

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

$I = (2000)(.1)(5 \text{years})$
$I = 1000$

$\text{Total} = 2000 + 1000 = 3000$

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.

$A = 2000(1 + 0.8)^5$

$(1.08)^5 = 1.469$

$A = 2000 (1.469) = 2938.66$

3. Which account is a better investment?

Which account has more money after 5 years?