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15 January, 21:53

First City Bank pays 7 percent simple interest on its savings account balances, whereas Second City Bank pays 7 percent interest compounded annually. If you made a deposit of $14,000 in each bank, how much more money would you earn from your Second City Bank account at the end of 12 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)

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  1. 15 January, 22:04
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    The amount of money you would earn more from your second City Bank account at the end of 12 years is $5,780.68

    Explanation:

    Initial Deposit = $14,000

    Rate = 7%

    Time = 12 Years

    The formula to calculate the amount using simple interest is as follows -

    PRT/100

    Simple interest = ($14,000*0.07*12)

    = $11,760

    Total amount after 12 years = $14,000 + $11,760

    $25,760

    For Second city bank with compound interest, the future value formula will be used:

    FV = PV (1 + r) t

    where,

    PV = $14,000

    r = 7%

    t = 12 years

    FV = FV = $14,000 (1.07) 12

    FV = $14,000 * 2.25

    FV = $31,530.68

    How much more you would earn more from your second City Bank account at the end of 12 years = $31,530.68 - $25,750

    = $5,780.68
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