Question
In: Finance
John has two options for investing her $10,000 in savings:Bank 1 offers a Certificate of...
John has two options for investing her $10,000 in savings:
Bank 1 offers a Certificate of Deposit with a 9.82% interest rate compounded annually.
Bank 2 also offers a Certificate of Deposit with a 9.82% interest rate, but the compounded monthly.
At over 15 years, how much more interest will John earn at Bank 2 than at Bank 1? Enter your answer rounded to the nearest dollar, without the "$".
Solutions
Expert Solution
1. Future value of investment in Bank 1 = Amount * (1 + Interest)^Years = 10000 * 1.0982^15 = $40759 (Rounded off)
2. Future value of investment in Bank 2 = Amount * (1 + Interest per month)^periods = 10000 * 1.00818^180 = $43362 (Rounded off)
3. At over 15 years, how much more interest will John earn at Bank 2 than at Bank 1?
Additional interest earned by Bank 2 = 43362 - 40759 = $2603 (answer)
jeff jeffy answered 2 years agoRelated Solutions
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