SOLUTION: Hello, I would like someone to check if I did this correctly please! Given: Bank A is lending money at 5.7% interest compounded annually. The rate of bank B is 5.65% compounded

Question 859894: Hello, I would like someone to check if I did this correctly please!
Given: Bank A is lending money at 5.7% interest compounded annually. The rate of bank B is 5.65% compounded monthly. At which bank will you pay the less interest over 10 years period? A hint is the given formula S=P(1+r/n)^t*n where P dollars are deposited into an account paying an annual rate of interest r compounded n times per year, then after t years the account will have S dollars.
My work:
For Bank A S=P(1+.057/1)^10*1 so about P(1.7408)
For Bank B S=P(1+.0565/12)^10*12 so about P(1.757)
What I'm worried about is what the question is asking for (paying the less interest). Since bank A has less money deposited does that mean that in Bank A you pay less? So the answer would be bank A?
Thanks in advance!
Answer by richwmiller(17219) (Show Source): You can put this solution on YOUR website!
Who said bank A has less money deposited?
The two banks are loaning you money and charging you interest on the loan.
Bank A is charging less interest according to your figures.
S=P(1+.0565/12)^10*12 so about P(1.757)
S = 17408. on 10000
S=P(1+.057/1)^10*1 so about P(1.7408)
S = 17408. on 10000
They charge the same.

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