First City Bank pays 3.2 percent simple interest on its savings account balances, whereas Second City Bank pays 6.2 percent interest compounded annually.
If you made a $567 deposit in each bank, how much more would the Second City Bank account be worth than the First City Bank account at the end of 9 years? (round 6 decimal places)
Ans $ 244.028700
FV = | Future Value | |
PV = | Present Value | |
r = | rate of interest | |
n= | no of period | |
FIRST BANK | ||
INTEREST INCOME | PRINCIPAL * RATE * TIME | |
567 * 3.2% * 9 | ||
163.296000 | ||
SECOND BANK | FV = | PV (1 + r )n |
FV = | 567*(1+6.2%)^9 | |
FV = | 974.3246936 | |
INTEREST EARNED = | FV - PV | |
974.3246936 - 567 | ||
407.324694 | ||
Second City Bank account be worth than the First City Bank account | 407.324694 - 163.296000 | |
244.028694 |
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