Answer:
Bank B would pay more interest than Bank A by $0.40
Step-by-step explanation:
we know that
The compound interest formula is equal to
\(A=P(1+\frac{r}{n})^{nt}\)
where
A is the Final Investment Value
P is the Principal amount of money to be invested
r is the rate of interest in decimal
t is Number of Time Periods
n is the number of times interest is compounded per year
in this problem we have
Bank A
\(t=1\ years\\ P=\$1,000\\ r=0.07\
=4\)
substitute in the formula above
\(A=1,000(1+\frac{0.07}{4})^{4*1}\)
\(A=1,000(1.0175)^{4}\)
\(A=\$1,071.86\)
Bank B
\(t=1\ years\\ P=\$1,000\\ r=0.071\
=2\)
substitute in the formula above
\(A=1,000(1+\frac{0.071}{2})^{2*1}\)
\(A=1,000(1.0355)^{2}\)
\(A=\$1,072.26\)
Find out the difference
\(\$1,072.26-\$1,071.86=\$0.40\)
therefore
Bank B would pay more interest than Bank A by $0.40
