Diagnostic Assessment A family has $1,000 to invest and is considering two options: investing in government bonds that offer 2% simple interest, or investing in a savings account at a bank, which charges a $20 fee to open an account and pays 2% compound interest. Both options pay interest annually. Here are two tables showing what they would earn in the first couple of years if they did not invest additional amounts or withdraw any money. Bonds: year of investment amount in dollars 0 $1000 1 $1020 2 $1040 Savings Account: year of investment amount in dollars 0 $980 1 $999.60 2 $1019.59 

1. Bonds: How does the investment grow with simple interest? 

2. Savings account: How are the amounts $999.60 and $1,019.59 calculated? 

3. For each option, write an equation to represent the relationship between the amount of money and the number of years of investment. 

4. Which investment option should the family choose? Use your equations or calculations to support your answer

Answer rating: 100% (QA)

1 Bonds In simple interest the interest earned each year is calculated by multiplying the principal ... View the full answer