Lia has $1000 to put in a savings account. She is choosing between two banks. Bank A offers 5% compounded quarterly and Bank B offers 5.1% compounded semiannually. If Lia plans on keeping her money in a savings account for a year, which bank would pay her more in interest, and by how much?

A. Bank B by 70.5 cents
B. Bank B by 33 cents
C. Bank A by 33 cents
D. Bank A by 70.5 cents

Question

Lia has $1000 to put in a savings account. She is choosing between two banks. Bank A offers 5% compounded quarterly and Bank B offers 5.1% compounded semiannually. If Lia plans on keeping her money in a savings account for a year, which bank would pay her more in interest, and by how much?

   A. Bank B by 70.5 cents 
   B. Bank B by 33 cents 
   C. Bank A by 33 cents 
   D. Bank A by 70.5 cents

anonymous · Answer

@keegan14 I suggest you to use this formula first. 

$$A=P(1+\frac{ r }{ m })^{mt}$$
A = Accumulated amount
P = Principal amount
r = rate of interest
t = number of times compounded per year

Then tell me what you got. :)