Question

Ariana has $1,000 to put in a savings account. She is choosing between two banks. Bank A offers 7% compounded quarterly and bank B offers 7.1% compounded śemiannually. If she saves for a year which bank would pay more interest and by how much.

Answer 1

Explanation:

APEX!! bank b by 82 cents

Answer 2

Bank B would pay more interest than Bank A by $0.40

Explanation:

we know that

The compound interest formula is equal to

`A=P(1+(r)/(n))^(nt)`

where

A is the Final Investment Value

P is the Principal amount of money to be invested

r is the rate of interest in decimal

t is Number of Time Periods

n is the number of times interest is compounded per year

in this problem we have

Bank A

`t=1\ years\\ P=\$1,000\\ r=0.07\\n=4`

substitute in the formula above

`A=1,000(1+(0.07)/(4))^(4*1)`

`A=1,000(1.0175)^(4)`

`A=\$1,071.86`

Bank B

`t=1\ years\\ P=\$1,000\\ r=0.071\\n=2`

substitute in the formula above

`A=1,000(1+(0.071)/(2))^(2*1)`

`A=1,000(1.0355)^(2)`

`A=\$1,072.26`

Find out the difference

`\$1,072.26-\$1,071.86=\$0.40`

therefore

Bank B would pay more interest than Bank A by $0.40