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First City Bank pays 5 percent simple interest on its savings account balances, whereas Second City Bank pays 5 percent interest compounded annually. Required: If you made a deposit of $11,500 in each bank, how much more money would you earn from your Second City Bank account at the end of 12 years

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Parrain

Answer: $2,252

Explanation:

First City Bank amount after 12 years;

= Amount + (Amount * rate * Number of years )

= 11,500 + ( 11,500 * 5% * 12)

= $18,400

Second City Bank using Compound interest

= 11,500 * ( 1 + 5%) ^ 12

= $20,652

Difference = 20,652 - 18,400

= $2,252

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