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Adnan puts $200 in an account with a 0.65 monthly interest rate. The account earns interest 12 times per year. He does not add money into or take money out of the account. Kwabena says: Adnan could earn more money if he puts the $200 into an account that earns 8% annual interest (1 time per year).



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Answer:

Kwabena's statement is incorrect. Even though the annual interest rate of 8% is higher than the monthly interest rate of 0.65%, the number of times the interest is compounded also impacts the overall earnings.

Step-by-step explanation:

In this case, with the interest being compounded 12 times per year, Adnan would earn more money with an account that has a 0.65% monthly interest rate compared to an account with an 8% annual interest rate compounded only once per year.

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