Answer:
The rate that Bank B must pay Derek to have have the same amount in both accounts after 10 years is:
= 22.611%
Explanation:
a) Data and Calculations:
Monthly deposit in Bank A= $279
Period of deposit = 120 (10 * 12) months
Interest rate = 14% compounded monthly
Using an online finance calculator, the future value =
Sum of all periodic payments = $33,480.00
Total Interest = $38,800.23
Future value of funds = $72,280.23
Annual deposit in Bank B = $2,447
Period of deposit = 10 years
Future value = $72, 280.23
Therefore, the Interest rate = 22.611%
