Answer:
Instructions are listed below.
Explanation:
Giving the following information:
You have $2,000 in an account which pays 2.9% compounded annually.
Second option:
An account earning 4.4% compounded quarterly.
Number of years= 4 years
To compare, we need to use the final value formula:
FV= PV*(1+i)^n
The option with greater final value is the most profitable.
Option 1:
PV= 2,000
i= 0.029
n= 4
FV= 2,000*(1.029)^4= $2,242.30
Option 2:
PV= 2,000
i= 0.044/4= 0.011
n= 4*4= 16
FV= 2,000*(1.011^16)= $2,328.59
Option 2 is the most profitable.
