You Are Choosing Between Investments Offered by Two Different Banks

question 138

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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