Question

Gianna has a two $3,000 one year CDs at different banks. Each compounds

Answer 1

Answer:

Option D

Step-by-step explanation:

To calculate compound interest we will use the formula :

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

Where,

A = Amount on maturity

P = Principal amount = $3000

r = rate of interest = 8.4% = 0.084

n = number of compounding period = Monthly = 12

t = time = 1 year

Now put the values in the formula.

$A=3000(1+\frac{0.08}{12})^{(12)(1)}$

   = $3000(1+0.007)^{12}$

   = 3000(1.007)¹²

   = 3000 × 1.08731066

   = 3261.93198 ≈ $3261.93

While the other bank compounds interest daily.

Therefore, n = 365

Now put the values in the formula with n = 365

$=3000(1+\frac{0.084}{365})^{(365)(1)}$

$=3000(1+0.00023014)^{365}$

$=3000(1.00023014)^{365}$

= 3000 × 1.08761958

= 3262.85874 ≈ $3262.86

Difference in the ending balance = 3262.86 - 3261.93

                                                       = $0.93

The difference in the ending balances of both CDs after one year would be $0.93.