You Are Choosing Between Investments Offered by Two Different Banks

question 165

Multiple Choice

You are choosing between investments offered by two different banks. One promises a return of 10% for three years using simple interest while the other offers a return of 10% for three years using compound interest. You should:

• A) Choose the simple interest option because both have the same basic interest rate.
• B) Choose the compound interest option because it provides a higher return.
• C) Choose the compound interest option only if the compounding is for monthly periods.
• D) Choose the simple interest option only if compounding occurs more than once a year.
• E) Choose the compound interest option only if you are investing less than $5,000.

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Definitions:

Gross Earnings

The total income earned by an individual or company before any deductions or taxes.

Convention Centre

A large facility designed to host conferences, meetings, exhibitions, and other events.

Regular Hourly Rate

The wage earned for each hour of work, not including overtime rates.

Time And a Half

Refers to the rate of pay that is 50% higher than an employee's regular rate, often used for overtime work.