Answer:
The monthly compounded interest rate of 0.14% of Unity Bank is a better plan.
Step-by-step explanation:
<em>Step 1 : Write the formula for calculating a monthly compound interest rate and for calculating an annually compounded interest rate.</em>
Monthly compound interest rate = P(1+r/n)^nxt
<em>n=12 (number of months in a year)</em>
<em>t=1 (number of years)</em>
Annually compound interest rate = P(1+r/n)^nxt
<em>n=1 (because it is for 1 year only)</em>
<em>t=1 (number of years=1)</em>
<em>Step 2 : Lets assume that P is $100 in both banks and time is 1 year.</em>
<em>Step 3 : Lets substitute the values to find out which one is better.</em>
Monthly compound interest rate = P(1+r/n)^nxt
Monthly compound interest rate = 100(1+0.14/12)^12x1
Monthly compound interest rate = 114.93
114.93 - 100 = $14.93 per month
14.93 x 12 = $179.16 for 12 months or 1 year
Annually compound interest rate = P(1+r/n)^nxt
Annually compound interest rate = 100(1+1.6/1)^1x1
Annually compound interest rate = 260
260-100 = $160 for 1 year
Therefore, the monthly compounded interest rate of 0.14% of Unity Bank is a better plan.
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