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You want to deposit $3,000 now into a savings account for 5 years. The Northeast bank...

You want to deposit $3,000 now into a savings account for 5 years. The Northeast bank offers an APR of 12% with simple interest while the Southwest bank offers an APR of 10% with monthly compounding. Which bank would you prefer and why?

a) The Northeast bank because it offers an additional $ 229 in interest.

b) The Northeast bank because it offers an additional $ 130 in interest.

c) The Southwest bank because it offers an additional $135 in interest.

d) The Southwest bank because it offers an additional $ 70 in interest.

e) The Northeast bank because it offers an additional $ 352 in interest.

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Answer #1
Computation of interest under simple interst method
Interest =
3000*12%*5 1800
Computation of interest under compounding interst rate
Interest = $                  1,935
3000*(1+10%/12)^(5*12)-3000
Additional interest = $                     135
1935-1800
Correct answer is option -
c) The Southwest bank because it offers an additional $135 in interest.
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