SOLUTION: 8. A savings bond came in two types. A simple interest bond for $100 that had a guaranteed return of $200 in 10 years, and a compound interest bond for $100 that had an interest r

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Question 878471: 8. A savings bond came in two types. A simple interest bond for $100 that had a guaranteed return of $200 in 10 years, and a compound interest bond for $100 that had an interest rate of 6.5% per annum compounded annually.
a) What is the interest rate on the simple interest bond?
b) Which one is better for a 10 year investment?
Answer by JulietG(1812) About Me  (Show Source):
You can put this solution on YOUR website!
For the first bond, it returns a 100% profit in 10 years. If nothing is compounded, that is a straight 10% per year (a very nice return!).
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For the second bond, if it's compounded annually for ten years, you'll get back $188.
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There's an excellent full explanation here: http://www.algebra.com/algebra/homework/Exponential-and-logarithmic-functions/Exponential-and-logarithmic-functions.faq.question.481218.html
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Note that credit cards compound their interest DAILY. It's how people get into trouble. Better to pay cash!