ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Jenn purchased a car for $13, 000. She had a choice between Bank 1 offering an interest rate of 3% compounded annually or Bank 2 offering a simple interest rate of 4%. Both banks will allow 5 years to pay off the loan. Which bank should she choose and why?
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Either. The interest will be the same at both banks because they are both for 5 years.
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Bank 1. It is always better to have compound interest.
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Bank 2. It is always better to choose simple interest.
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Bank 1. The interest to be paid back is $2070 while Bank 2 has interest at $2600.
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Explanation:
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