Question

Sonja has $1,800 to invest, And she has a choice between two savings accounts. Saving account a offers an interest rate of 3.6% compounded monthly, while savings Account be offers an interest rate of 4.8%, compounded monthly. How much more would she have after two years with savings account be done with savings account a?

Answer 1

$46.83

Explanation:

The standard formula for compound interest is given as;

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

Where;

A = final amount/value

P = initial amount/value (principal)

r = rate yearly

n = number of times compounded yearly.

t = time of investment in years

For saving account A;

P = $1,800

t = 2 years

n = 12 (monthly

r = 3.6% = 0.036

Substituting the values;

A = 1800(1+0.036/12)^(12×2)

A1 = $1934.17

for saving account B;

P = $1,800

t = 2 years

n = 12 (monthly

r = 4.8% = 0.048

Substituting the values;

A = 1800(1+0.048/12)^(12×2)

A2 = $1981.00

The difference will then be

d = A2 - A1

d = $1981.00 - $1934.17

d = $46.83

Therefore, she would have $46.83 more