Compound interest: 7500 * [(1.06^10) - 1] = $5,931.36
Difference: 5931.36 - 4500 = $1,431.36 more in the compound interest account after 10 years
Present amount P = $ 7,500
i = 6%
compounding periods n= 10 years
Future amount of a present value:
F = F/P ($7,500, 10 yrs, 6%) = $13,431.36
First city bank account will accumulate:
F = 7500 + (7500 * 6% * 10) = $ 12,000
Difference between the two
= $13,431.36 - 12000 = $ 1,431.36
City Bank pays 6 percent simple interest on its savings account balances, whereas Second City Bank pays 6 percent interest compounded annually. If you made a $7,500 deposit in each bank, how much more money would you earn from your Second City Bank account at the end of 10 years?
