Question

You have $5,800 to deposit Regency Bank offers 12 percent per year compounded monthiy (1 percent per month), while King Bank offers 12 percent but will only compound annually. How much will your investment be worth in 20 years at each bank? (Do not round Intermediate calculations and round your answer to 2 decimal places, e.g.. 32.16.) points eBook Regency Bank King Bank

Answer 1

Regency bank

Deposit = $5,800

Interest (i) = 1% per month, compounded monthly

Time period (n) = 20 year or 20 x 12

= 240 months

Amount after 20 year = Deposit x (1 + i)ⁿ

= 5,800 x (1 + 0.01)²⁴⁰

= 5,800 x (1.01)²⁴⁰

= 5,800 x 10.8925536539

= $63,176.81

King bank

Deposit = $5,800

Interest (i) = 12%

Time period (n) = 20 year

Amount after 20 year = Deposit x (1 + i)ⁿ

= 5,800 x (1 + 0.12)²⁰

= 5,800 x (1.12)²⁰

= 5,800 x 9.6462930933

= $55,948.50

Regency bank	$63,176.81
King bank	$55,948.50

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