Wells Fargo Bank pays 6 percent simple interest on its savings account balances, whereas Bank of America pays 6 percent compounded annually. If you made a $11,914 deposit in each bank, how much more money would you earn from your Bank of America account at the end of 27 years?

rochioblogmz

rochioblogmz

Answered question

2022-10-20

Wells Fargo Bank pays 6 percent simple interest on its savings account balances, whereas Bank of America pays 6 percent compounded annually. If you made a $11,914 deposit in each bank, how much more money would you earn from your Bank of America account at the end of 27 years?

Answer & Explanation

dwubiegrw

dwubiegrw

Beginner2022-10-21Added 13 answers

Wells Fargo Bank:
Simple interest=Principal*Interest rate*Time period
= 11 , 914 6 % 27
= $ 19300.68
Future value=Principal+Simple interest
= 11 , 914 + 19300.68
= $ 31214.68
Bank of America:
We use the formula:
A = P ( 1 + r 100 ) n
where
A=future value
P=present value
r=rate of interest
n=time period.
A = 11 , 914 ( 1.06 ) 27
= 11 , 914 4.82234594
= $ 57453.43(Approx)
Hence excess value = 57453.43 31214.68
= $ 26238.75(Approx)

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