Question

Donna Clark has $15,000 that she can deposit into a savings account for five years. Bank A compounds interest annually, Bank B twice a year, and Bank C quarterly. Each bank has a stated interest rate of 5 percent. What account balance would Donna have at the end of the fifth year if she left all the interest paid on the deposit in each bank

Answer 1

$19,144.22

$19,201.27

$19,230.56

Step-by-step explanation:

The formula for calculating future value:

FV = P (1 + r) n

FV = Future value

P = Present value

R = interest rate

N = number of years

Bank A = 15,000(1.05)^5 = $19,144.22

Bank B = 15,000(1.05/2)^10 = $19,201.27

Bank C = 15,000(1.05/4)^20 = $19,230.56