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Jlenok [28]
4 years ago
8

Simple Interest versus Compound Interest [LO1] First City Bank pays 7 percent simple interest on its savings account balances, w

hereas Second City Bank pays 7 percent interest compounded annually. If you made a $6,000 deposit in each bank, how much more money would you earn from your Second City Bank account at the end of nine years?
Business
1 answer:
inna [77]4 years ago
8 0

Answer:

You would have $1,251 more money in second city bank than the first city bank.

Explanation:

First city bank pays 7% simple interest.

Interest = (PRT)/100

Interest = (6000 * 7 * 9)/100 = 378000/100 = $3,780

Amount in first city bank after 9 years = 6000 + 3780 = $9,780

The second city bank pays 7% interest compounded annually, so we would find the amount after 9 years.

P = $6,000

R = 7% = 7/100 = 0.07

T = 9

A = P(1 + R) ^ {t}\\

A = 6000(1 + 0.07)^ {9}\\

A = 6000(1.07)^{9}\\

A = 6000 * 1.838459212420\\

A = 11030.75527452\\

A = 11031

Amount after 9 years in second city bank = $11,031

Difference between first city bank and second city bank: 11031 - 9780 = 1251.

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The implicit borrowing rate is 31.4%.
Given that if payment was made in cash today, the store would reduce the cost of the product by 2.5 percent. This implies that the price you must pay at that time is $195.5, for instance, if the cost of the things is perhaps $200.
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