(07.01 MC) Harrison and Sherrie are making decisions about their bank accounts. Harrison wants to deposit $200 as a principle amount, with an interest of 2% compounded quarterly. Sherrie wants to deposit $200 as the principle amount, with an interest of 4% compounded monthly. Explain which method results in more money after 2 years. Show all work.

The option with a higher future value is Option 2.

Step-by-step explanation:

To determine which option is best, we need to determine the higher Future Value. To calculate the FV, we need to use the following formula:

FV= PV*(1+i)^n

Option 1:

n= 2*4= 8 quarters

i= 0.02/4= 0.005

PV= $200

FV= 200*(1.005^8)

FV= $208.14

Option 2:

n= 2*12= 24 months

i= 0.04/12= 0.003333

PV= $200

FV= 200*(1.003333^24)

FV= $216.63

The option with a higher future value is Option 2.

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