First City Bank pays 8 percent simple interest on its savings account balances,

Question

First City Bank pays 8 percent simple interest on its savings account balances, whereas Second City Bank pays 8 percent interest compounded annually.

If you made a $58,000 deposit in each bank, how much more money would you earn from your Second City Bank account at the end of 8 years? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

First City Bank pays 8 percent simple interest on its savings account balances, whereas Second City Bank pays 8 percent interest compounded annually.

Explanation / Answer

Difference in money = 58000*[ (1.08^8) - (1+0.08*8) ] = $12,234

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