Which option resulted in having more money? explain the role compound interest played in making this possible.


Question: Which option resulted in having more money? explain the role compound interest played in making this possible.

The option that resulted in having more money was the option with the higher interest rate. This is because compound interest allows you to earn interest on your interest, which can lead to significant growth over time.

For example, if you invest $1,000 at a 5% interest rate, you will earn $50 in interest in the first year. In the second year, you will earn $50 in interest on your original investment, plus $2.50 in interest on the interest you earned in the first year. This means that you will have a total of $1,052.50 after two years.

If you invest $1,000 at a 10% interest rate, you will earn $100 in interest in the first year. In the second year, you will earn $100 in interest on your original investment, plus $10 in interest on the interest you earned in the first year. This means that you will have a total of $1,110 after two years.

As you can see, the option with the higher interest rate resulted in having more money after two years. This is because compound interest allowed the investors to earn interest on their interest.

Compound interest can have an even greater impact over longer periods of time. For example, if you invest $1,000 at a 5% interest rate for 20 years, you will have a total of $2,653.30 after 20 years. If you invest $1,000 at a 10% interest rate for 20 years, you will have a total of $6,727.50 after 20 years.

As you can see, compound interest can be a powerful tool for growing your money over time. If you are saving for retirement or another long-term goal, it is important to choose an investment option that offers a high interest rate.

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