Ariana has $1,000 to put in a savings account. She is choosing between two banks. Bank A offers 7% compounded quarterly and bank B offers 7.1% compounded śemiannually. If she saves for a year which bank would pay more interest and by how much.

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Question:

Ariana has $1,000 to put in a savings account. She is choosing between two banks. Bank A offers 7% compounded quarterly and bank B offers 7.1% compounded śemiannually. If she saves for a year which bank would pay more interest and by how much.

Answer:

Answer:

Bank B would pay more interest than Bank A by $0.40

Step-by-step explanation:

we know that    

The compound interest formula is equal to  

 

where  

A is the Final Investment Value  

P is the Principal amount of money to be invested  

r is the rate of interest  in decimal

t is Number of Time Periods  

n is the number of times interest is compounded per year

in this problem we have  

Bank A

 

substitute in the formula above  

 

 

 

Bank B

 

 

 

 

Find out the difference

therefore

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