Question

You have $5,100 to deposit. Regency Bank offers 12 percent per year compounded monthly (1.0 percent per month), while King Bank offers 12 percent but will only compound annually.

How much will your investment be worth in 18 years at each Bank? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

	Investment value
Regency Bank	$
King Bank	$

Answer 1

	Investment Value-Regency Bank
	12 percent per year compounded monthly
	FV= PV X (1+r)^n
	=$5,100 X (1+0.01)^216
	=$5,100 X (1.01)^216
	=5,100 X 8.5786
	43,750.86
	Because the interest is compounded Monthly, we convert 18 years to 216 Monthly periods(18 X12), and the annual interest rate of 12% to the monthly rate of 1%.
	Investment Value-King Bank
	12 percent but will only compound annually.
	FV= PV X (1+r)^n
	=$5,100 X (1+0.12)^18
	=$5,100(1.12)^18
	=$5,100 X 7.6900
	39219.00