Question

Bank A is lending money at 6.4% interest compounded annually. The rate at Bank B is 6.3% compounded monthly, and the rate at Bank C is 6.35% compounded daily. Determine the amount of interest you would earn at each bank if you invest $1500 for 12 months.Which bank will you pay the least amount?

Answer 1

$1596

$1597.28

$1598.33

bank A

Explanation:

The formula for calculating compound interest:

FV = P (1 + r/m)^mn

FV = Future value

P = Present value

R = interest rate

N = number of years

m = number of compounding

Bank A = $1500(1.064) = $1596

Bank B = $1500( 1 + 0.063/12)^12 = 1597.28

Bank C = $1500( 1 + 0.0635/365)^365 = $1598.33

Bank A pays the least amount of interest