Answer:
Bank B would pay more interest than Bank A by $0.40
Step-by-step explanation:
we know that
The compound interest formula is equal to
[tex]A=P(1+\frac{r}{n})^{nt}[/tex]
where
A is the Final Investment Value
P is the Principal amount of money to be invested
r is the rate of interest in decimal
t is Number of Time Periods
n is the number of times interest is compounded per year
in this problem we have
Bank A
[tex]t=1\ years\\ P=\$1,000\\ r=0.07\\n=4[/tex]
substitute in the formula above
[tex]A=1,000(1+\frac{0.07}{4})^{4*1}[/tex]
[tex]A=1,000(1.0175)^{4}[/tex]
[tex]A=\$1,071.86[/tex]
Bank B
[tex]t=1\ years\\ P=\$1,000\\ r=0.071\\n=2[/tex]
substitute in the formula above
[tex]A=1,000(1+\frac{0.071}{2})^{2*1}[/tex]
[tex]A=1,000(1.0355)^{2}[/tex]
[tex]A=\$1,072.26[/tex]
Find out the difference
[tex]\$1,072.26-\$1,071.86=\$0.40[/tex]
therefore
Bank B would pay more interest than Bank A by $0.40
