algebra word problem question

Question

Jenna’s parents give her a gift of $15,000 to put in a college savings account for her son. She is deciding between two different plans: One pays 3.5% interest compounded monthly, and the other pays 2% interest compounded semiannually. Which plan should she choose if she wants to maximize the amount in the account in 15 years?

Answer 1

A = $15,000 ( 1 + r/n ) ^nt

 

A = amount;  r = rate of interest in decimal

n= compoundings  per year;  t = years

 

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3.5% interest compounded monthly

 

A = $15,000 ( 1 + .035/12 )¹²⁽¹⁵⁾

 

A = $#25, 725

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2% interest compounded semiannualy

 

A = $15, 000 ( 1 + .02/2 )²⁽¹⁵⁾

 

A = $20,220

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3.5% interest, compounded monthly will

earn the most interest in 15 years