In: Finance
Dunwoody Bank offers 1.8% interest compounded monthly. Chamblee Bank offers 2.2% interest compounded quarterly. A client wants to deposit $10,000 for 3 years and get the better return on his deposit. Calculate the return each bank would give on his deposit so the client can decide which will be better for him
Firstly, we will calculate the future value of principle amount on rate of interest offered by both the banks
Particulars |
Dunwoody Bank |
Chamblee Bank |
Rate of Interest offered |
1.8% |
2.2% |
Compounding |
Monthly |
Quarterly |
Principal Amount invested |
$10,000 |
$10,000 |
Time Period |
3 Years |
3 Years |
Future Value of Deposit after 3 years |
$10,554.42 |
$10,680.34 |
Interest Earned |
$554.42 |
$680.34 |
Thus, after comparing the interest rate offered by both the banks. It can be clearly stated that Interest rate generated on investment made in Chamblee Bank (i.e., $680.34) is more than Dunwoody Bank ($554.42). Subsequently, the Chamblee Bank can be preferred over Dunwoody Bank.