Question

Over 2 years, how much does $2000 in a savings account with an APR of 4.2% compounded semiannually earn in interest than the same amount in a savings account with an APR of 3.6% compounded monthly?

A. $6.07
B. $12.15
C. $48.58
D. $24.29

Answer 1

A = P(1+r/n)^(nt) Use this formula

Answer 2

P = $2000
r = 0.042
t = 2
A = ?
n = 2

Answer 3

4.2% Interest
Total = 2,000 * (1+ (.042/2)^2*2
Total = 2,000 * 1.0866832385
Total = 2,173.37

3.6% Interest compounded monthly
Total = 2,000 * (1+ (.036/12))^24
Total = 2,000 * 1.0745395191
Total = 2,149.08

The difference between the two amounts is 24.29 so the answer is D.

Here's a calculator that converts annual interest to semi-annual, quarterly, monthly, daily or continuous interest.
http://1728.org/intrate.htm

Answer 4

Thanks!