Question

- You are planning to deposit $100,000 into a bank account and to
leave the funds on deposit for 12 years. Bank A pays interest at a
rate of 3%, compounded annually. Bank B pays interest at a rate of
2.5%, compounded semiannually. Bank C pays interest at a rate of
2.2% compounded daily.
- If you put your money into Bank A, how much will you have in the account after the 12 years?
- If you put your money into Bank B, how much will you have in the account after the 12 years?
- If you put your money into Bank C, how much will you have in the account after the 12 years?
- What factors contribute to the difference in the amounts in a, b and c? Explain.

Answer #1

**SOLUTION:-**

a. 142,576.09

b. 134,735.11

c. 130,211.78

d. Factprs which contribured a difference in the amounts is the interest rate per annum and the fequency of compounding.

future value = present value ( 1 + periodic rate ) no, of periods

**a)**. period, years,

FV = 100,000 ( 1 + 0.03)12

**FV = 142,576.09**

**b)**. period = half year

FV = 100,000 ( 1 + 0.025/2) 12 x 2

**FV = 134,735.11**

**c)** period = daily

FV = 100,000 ( 1 + 0.022 / 365) 12 x 365

**FV = 130,211.78**

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