Respuesta :
Answer:
The monthly compounded interest rate of 0.14% of Unity Bank is a better plan.
Step-by-step explanation:
Step 1 : Write the formula for calculating a monthly compound interest rate and for calculating an annually compounded interest rate.
Monthly compound interest rate = P(1+r/n)^nxt
n=12 (number of months in a year)
t=1 (number of years)
Annually compound interest rate = P(1+r/n)^nxt
n=1 (because it is for 1 year only)
t=1 (number of years=1)
Step 2 : Lets assume that P is $100 in both banks and time is 1 year.
Step 3 : Lets substitute the values to find out which one is better.
Monthly compound interest rate = P(1+r/n)^nxt
Monthly compound interest rate = 100(1+0.14/12)^12x1
Monthly compound interest rate = 114.93
114.93 - 100 = $14.93 per month
14.93 x 12 = $179.16 for 12 months or 1 year
Annually compound interest rate = P(1+r/n)^nxt
Annually compound interest rate = 100(1+1.6/1)^1x1
Annually compound interest rate = 260
260-100 = $160 for 1 year
Therefore, the monthly compounded interest rate of 0.14% of Unity Bank is a better plan.
!!
Answer:
The Unity Bank is offering a good plan.
Step-by-step explanation:
Unity Bank offers a monthly compounded interest rate of 0.14%
So, yearly rate will be = [tex]0.14\times12=1.68[/tex]% or 0.0168
Sunrise Banking offers 1.6% or 0.016 interest compounded annually.
Lets check an example with these two rates.
The compound interest formula is = [tex]A=P(1+r/n)^{nt}[/tex]
Lets take P = $1000 and t = 1 year
Case 1: when r = 1.68% and n = 12
Putting the values in formula we get
A = [tex]1000(1+0.0168/12)^{12}[/tex]
= [tex]1000(1.0014)^{12}[/tex]
A = $1016.92
Case 2: when r = 1.6% and n = 1
Putting the values in formula we get
A = [tex]1000(1+0.016/1)^{1}[/tex]
= [tex]1000(1.016)^{1}[/tex]
A = $1016.00
So, we can see that the first case gives more return than second one.
Therefore, the Unity Bank is offering a good plan.
