Bank of Pomona pays 9 percent simple interest on its high rewards checking accounts. Bank of San Dimas, instead, pays 9 percent interest, and it has annual compounding. Let's say, you make a $7,500 deposit in each of these two banks. Calculate how much more money you would be able to earn from the Bank of San Dimas account at the end of eight years. (Do not round intermediate calculations and round your answer to 2 decimal places. E.g., type 32.16 for "32 dollars and 16 cents".)

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Tringa0 Tringa0 · Answer 1 · 2020-02-13T08:14:21+01:00

Answer:

This difference is equal to the money we will able to earn from the Bank of San Dimas account at the end of eight years.

Explanation:

Principle amount deposited in the Bank of Pomona , P= $7,500

Rate of the simple interest = R = 9%

Duration of time = T = 8 years

Simple interest = I

[tex]I=\frac{P\times R\times T}{100}[/tex]

[tex]I=\frac{\$7,500\times 9\times 8}{100}=\$5,400[/tex]

Total amount earned = A = $7,500 +$5,400 = $12,900

Principle amount deposited in the Bank of San Dimas, P= $7,500

Rate at interest is compounded = R = 9% = 0.09

Duration of time = T = 8 years

Number of times interest applied per time period , n = 1

Amount after 8 years = A'

[tex]A'=P(1+\frac{R}{n})^{nt}[/tex]

[tex]A'=\$7,500(1+\frac{0.09}{1})^{1\times 8}[/tex]

A'= $14,944.22

Difference of amounts in both banks after 9 years :

A' - A = $14,944.22 - $12,900 = $2,044.22

This difference is equal to the money we will able to earn from the Bank of San Dimas account at the end of eight years.