Question

0 The Continental Bank advertises capital savings at 5.8% compounded semi-annually while TD Canada Trust offers premium savings at 5.7% compounded monthly. Suppose you have $3000 to invest for two years. (a) Which deposit will earn more interest? (b) What is the difference in the amount of interest? (a) The savings account will earn more interest (b) The difference is $ (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)

Answer 1

Given Capital Bank interest rate : 5.8% Compounded semi-a annually amount invested = $3000 time t= 2 years. nt Future value A = p(!+ Itr p= amount invested = $3000 re interest rate = suf% = 0,058 of compounding na no. of periods = 2 (semi-ar annually 4= time = 2 years i two times a year) 282 2000 ( 1+0.05) It 0.02914 = 3000(1.02934 3000 ° C A = $3363. 43 Future value A = pt interest 136314 3 3000+ interest =7 interest (IF 336 3. 43 - 3000 I = $363.43

TD Canada trust interest rate r= 5.7% =0.057 Compounded mon conthly P= amount invested a $3000 t= time = 2 years no. of compounding periods = 12 (12 months in a year) na no. nyt Future value 1 2x2 = 3000 A = pt ) (14 0.062) -2000(1.00475) >4 = $3361-35 A = pt interest

3361.35= 3000+ interest interest (I) = 3361.35-3000 In = 361.35 com mparing interests earned I, = 363. 43 and Iz= - 361-35 I, YI : The continental Bank will give more interest interest for account. saving b Difference between the interests I - Iz= 363.43-361.35 -$2.08 Difference between interests - $2.08
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