Question

Chad and David both deposit $5,000 into the bank. Chad makes his deposit into a Fifth Third bank account that pays 2 percent interest compounded annually. David makes his deposit into a Truist bank account that pays 3.5 percent interest, compounded annually. By the end of the third year after the deposits are made:

• David will have a larger account value than Chad will.

• Both Chad and David will have accounts of equal value.

• David will have twice the money saved that Chad does.

• Chad will have more money saved than David.

• David will earn exactly twice the amount of interest that Chad earns.

Answer 1

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

Where:

• A = Accrued Amount (principal + interest)
• P = Principal Amount
• I = Interest Amount
• R = Annual Nominal Interest Rate in percent
• r = Annual Nominal Interest Rate as a decimal
• r = R/100
• t = Time Involved in years, 0.5 years is calculated as 6 months, etc.
• n = number of compounding periods per unit t; at the END of each period

A for Chad=5000(1+.02)³

^=5306.04

Interet Chad=A-P

=306.04

A for David= 5000(1+.035)³

^=5543.59

^{Interest for David= 543.59}

David will have a larger account value than Chad will.