Simple Vs. Compound Interest

Practice:

You are the financial consultant of Bruce Wayne. He wants to invest in a savings account. Choose Bank offers himto open an account with $1000.00 and simple annual interest of 6.8%. Wheels Ferris Bank offers him to open anaccount also with $1000.00 and an annual compounded interest of 4.2%.

  1. Write an equation to represent each investment option.
  1. What type of function best model the Choose Bank savings account? What type of function will best be used torepresent the Wheels Ferris Bank? Justify your answer. (hint: think about the behavior and definitions of simpleinterest and compounded interest)
  1. Sketch a graph to represent each investment option at 10, 20, 30, and 40 years. Label the axis.
  1. If Bruce Wayne wants to withdraw the balance from the accounts after 10 years, which investment option willyou recommend Mr. Wayne to open? Why?
  1. Create a table to compare both investments at different times.

Time
Choose Bank
Wheels Ferris Bank
  1. If Bruce Wayne withdraws the balance of both accounts after 20 years, which investment option would yourecommend Mr. Wayne to take? Why?
  1. If he opens both accounts, when will both of his accounts have the same balance? Describe how or the mathematicalprocess you can use to find the answer to this question?
  1. After how many years will the savings account with the compounded interest be a better investment than thesaving account with the simple interest? (Hint: when the balance of the Wheels Ferris Bank would be greater thanthe balance of the Choose Bank)
  1. Which investment option will be better in the short term? Which will be better to invest in the long term? Why?
  1. What would be your overall advice to Mr. Wayne? Which savings account would you recommend Mr. Wayneto open and why? Justify your answer.