Question

Crestline Bank offers 3% simple interest on deposits. Mid City Bank offers 2% interest compounded annually.

Jill deposits $3000 in Crestline Bank and Owen deposits $3000 in Mid City Bank.

What is the difference in final balances for Jill and Owen at the end of 5 years?

A.
$177.82

B.
$165.58

C.
$150.00

D.
$137.76

Answer 1

One is compounded yearly hence annually while the other is just simple interest.

Answer 2

so A?

Answer 3

Have you done the calculations to think the answer is A?
If so, show them.

Answer 4

is it A?

Answer 5

For the first one we can use the simple interest formula for the account in crestline bank where p = principle starting value, r is the interest rate and t = time in years.

\[i = p*r*t\]


\[(3*10^{3})(\frac{ 3 }{ 100 })(5) = $450\]

for the other one we need to take into account that the interest is compounded. annualy.

Answer 6

Compound interest formula where P is your starting value, r is your interest rate, and n is the number of times your interest rate is compounded. and t is in years.

\[A = P(1+\frac{ r }{n })^{nt}\]

Answer 7

follow?

Answer 8

kinda not the second one

Answer 9

BTW that formula gives the interest gained so I think it's actually 450+3,000 our initial deposit. 3450 is what we end up getting.

Answer 10

P is our principle 3,000
r is our interest rate which is 2/100 0.02
n is the number of times it's compounded since it's compounded yearly or annually it's 1
t is the time in years 5 years

\[3,000(1+0.02)^{5} = $3,312~Mid~CityBank \]

\[Crestline~Bank = $3,450\]

seeing these two options which one has the better interest?

Answer 11

the question is asking for the difference in deposits for the two

Answer 12

D