Question

5. Whitney deposits $9,000 for 2 years. She compares two different banks. State

Answer 1

Answer:

a. $ 381.969,

b. $ 369.171,

c. Kings Savings

d. Reliability.

Step-by-step explanation:

∵ Amount formula in compound interest,

$A=P(1+r)^t$

And, amount formula in continuously,

$A=Pe^{rt}$,

Where,

P = principal amount,

r = rate per periods,

t = number of periods,

a. In State bank,

P = $ 9000, r = 2.1% = 0.021, t = 2 years,

Also, interest earned compound annually,

Thus, amount,

$A=9000(1+0.021)^2 = 9000(1.021)^2 = \ 9381.969$

So, interest earned = A - P = 9381.969 - 9000 = $ 381.969,

b. In Kings Savings,

P = $ 9000, r = 2.01% = 0.0201, t = 2 years,

Also, interest earned compound continuously,

Thus, amount,

$A=9000e^{0.0201\times 2} = \ 9369.171$

So, interest earned = A - P = 9369.171 - 9000 = $ 369.171,

c. ∵ 369.171 > 381.969

Thus, King saving pays higher interest.

d. Since, the other factors might affect Whitney's choice besides interest would be reliability.