POTW #2 Answer and Explanation

This problem involves compound interest. In order to solve this problem, you would have to understand some vocabulary. When something is "compounded", it means that the interest is added on to it. For example, if something was compouded monthly at a rate of 5%, then you would add 5% every month. Also, "compounded triyearly" means that it would be compounded three times per year, so about every four months. You would also have to know the form of an exponential equation, a*b^x, where a is the starting number (in this case, 1000), b is the growth or decay rate, and x is the number of times it is compounded.

To start, you would have to write an expression for each of the three different interest plans:
1. 1000*1.012
2. 1000*1.001^12
3. 1000*1.0035^3

Then, just solve each of the equations and see which one is bigger:
1. $1012
2. $1012.07
3. $1010.54

According to the work, John should pick choice two for his interest plan for his bank account. This would give him the most money, $0.07 more than the first choice. Every penny counts!