00:01
We're given two ads.
00:02
The first one says there is a 5 .25 interest rate compounded monthly.
00:08
And the second ad says that there's a 5 .35 interest rate compounded annually.
00:14
And we're asked to see which one of these provides a better investment.
00:19
So let's do this by using the compound interest formula and plugging in a random starting value and a random year.
00:27
So our starting value, let's just put 100.
00:30
As our starting value.
00:31
So this is for the first account.
00:35
So 100 is our starting value times 1 plus 0 .525, or sorry, 0 .0 525, since that's equivalent to 5 .25%.
00:49
And this is compounded monthly, or 12 times a year, in other words.
00:55
And this is going to be, let's say that we're compounding this value for just one year...