First City Bank pays 7 percent simple interest on its savings account balances, whereas Second City Bank pays 7 percent interest compounded annually. If you made a deposit of $14,000 in each bank, how much more money would you earn from your Second City Bank account at the end of 12 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)

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Business

Miles Lutz

23 November, 04:40

First City Bank pays 7 percent simple interest on its savings account balances, whereas Second City Bank pays 7 percent interest compounded annually. If you made a deposit of $14,000 in each bank, how much more money would you earn from your Second City Bank account at the end of 12 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)

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Answers (1)

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Brooke Hicks · Answer 1

The amount of money you would earn more from your second City Bank account at the end of 12 years is $5,780.68

Explanation:

Initial Deposit = $14,000

Rate = 7%

Time = 12 Years

The formula to calculate the amount using simple interest is as follows -

PRT/100

Simple interest = ($14,000*0.07*12)

= $11,760

Total amount after 12 years = $14,000 + $11,760

$25,760

For Second city bank with compound interest, the future value formula will be used:

FV = PV (1 + r) t

where,

PV = $14,000

r = 7%

t = 12 years

FV = FV = $14,000 (1.07) 12

FV = $14,000 * 2.25

FV = $31,530.68

How much more you would earn more from your second City Bank account at the end of 12 years = $31,530.68 - $25,750

= $5,780.68