Question

Businesses deposit large sums of money Into bank accounts. Imagine an account with $10 million dollars in It.

a. How much would the account earn in one year of simple interest at a rate of 2.12%? Round to the nearest cent.
b. How much would the account earn In one year at 2.12% If the Interest was compounded daily? Round to the nearest cent.
c. How much more Interest is earned
earned by interest compounded dally compared to simple interest?

Answer 1

Explanation:

Given as :

The principal in the account = $10,000,000

The rate of interest = 5.12% at simple interest

The time period = 1 years

Let The amount that account earn after 1 year = $A

From Simple interest method

Simple interest = S.I =

or, S.I =

or, S.I =

or, S.I = $512,000

So, Simple interest = S.I = $512,000

Now, Amount = Principal + Interest

I.e A = $10,000,000 + $512,000

Or, A = $10,512,000

So, Amount = A = $10,512,000

Hence The account will earn in one year the amount of $10,512,000 Answer