SOLUTION: two banks pay simple interest on short-term deposits. bank a pays 5% p.a. over 3 years, and bank b pays 5.5% p.a. for 2 1/2 years. the difference between the two banks final payout

Algebra ->  Trigonometry-basics -> SOLUTION: two banks pay simple interest on short-term deposits. bank a pays 5% p.a. over 3 years, and bank b pays 5.5% p.a. for 2 1/2 years. the difference between the two banks final payout      Log On


   

Question 1153423: two banks pay simple interest on short-term deposits. bank a pays 5% p.a. over 3 years, and bank b pays 5.5% p.a. for 2 1/2 years. the difference between the two banks final payout figure, if $10,000 was invested in each account is:
a. $0
b. $125
c. $250
d. $1,375
e. $1,500
Answer by MathLover1(20850) About Me  (Show Source):
You can put this solution on YOUR website!
Simple Interest formula:
FV++=P+%281+%2B+rY%29+
where
FV+ = final payout
P=10000
r=5%=0.05
Y=3 (number of years)
bank a:
FV++=++10000%281+%2B0.05%2A3%29
FV++=10000%281+%2B0.15%29
FV++=11500

bank b:
FV++=++10000%281+%2B0.055%2A2.5%29
FV++=10000%281+%2B0.1375%29
FV++=11375
the difference between the two banks final payout figure: $11500-11375=125
answer:
b. $125