Carlos is looking at different savings account options to save for college. First Bank offers 1% interest compounded annually. Community Bank offers 2% simple interest. If Carlos is depositing $1,000 into the account for four years with no additional withdrawals or deposits, which bank is the better choice?

Community Bank is the better choice.

Step-by-step explanation:

-We calculate the interest earned on the principal over 4 years for the different banks:

#First Bank, i=0.01, P=$1,000

Hence, the interest earned on the principal is $40.60

#Community Bank, i=0.02,P=$1,000, the interest earned, I, over 4 years is:

The simple interest earned is greater than the compound interest earned:

Hence, Community Bank is the better choice.