The Continental Bank advertises capital savings at 6.1% compounded annually while TD Canada Trust offers premium...
The Continental Bank advertises capital savings at 6.1% compounded annually while TD Canada Trust offers premium savings at 5.85% 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?
(Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)
Homework Answers
Effective Annual Interest:
Continental Bank = 6.1%
Canada Trust:
Monthly rate of interest = 5.85%/12 = 0.4875%
Effective Annual Rate of Interest = (1+0.4875%)12 – 1
= 6.009430%
Hence, Continental Bank deposit will earn more interest.
b)Difference in interest = 3,000(6.1%-6.009430%)2
= $5.43
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