Concept explainers
To find: the option will yield more money after 3 years with an initial deposit of $1500.
Answer to Problem 25PPS
Explanation of Solution
Given information:
A bank offers the options shown for interest rates on their savings accounts.
Calculation:
The given data is $1500 at 6.25% for 3 years.
So, the amount will be after 3 years
In case of compounded annually:
You will make a table and find the compounded annually.
Year | principal | Rate of Interest | Time | Simple interest | Compounded Annually |
0 | 1500 | 0.0575 | 1 | ||
1 | 1500 | 0.0575 | 1 | 86.25 | 1586.25 |
2 | | 0.0575 | 1 | 91.21 | 1677.46 |
3 | 1677.46 | 0.0575 | 1 | 96.45 | 1773.91 |
So, the amount in the account after 3 years is $1773.91. Hence,
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