First City Bank pays 7 percent simple interest on its savings account balances,

Question

First City Bank pays 7 percent simple interest on its savings account balances, whereas Second City Bank pays 7 percent interest compounded annually.

If you made an $14,000 deposit in each bank, how much more money would you earn from your Second City Bank account at the end of 12 years? (Do not include the dollar sign ($). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

First City Bank pays 7 percent simple interest on its savings account balances, whereas Second City Bank pays 7 percent interest compounded annually.

Explanation / Answer

Simple Ampunt = Principal ( 1 + r*t)

Compounded Amount

= Principal * ( 1 + rate)^time

A1 = 14000 * (1 + 0.07*12) = $ 25760

A2 = 14000 * ( 1 + 0.07)^12 = $ 31531.68

Difference = A2 - A1 = $ 5770.68

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.