Question

58.April would like to invest $200 in the bank for one year. Three banks all have a nominal APR of 1.5%, but compound the interest differently.

a. Bank A computes interest just once at the end of the year. What would April’s balance be after one year with this bank?

Answer 1

$203.00

Explanation:

Since the bank in question compounds interest just once, and this is a one year investment, it can be treated as a simple rate interest problem. Therefore, the total balance after one year (B) is given by the following formula:

`B= 200*(1+i)\\B= 200*(1+0.015)\\\\B= 203`

April's balance would be $203.00 after one year.