Part I: Joe just graduated from College and has found a nice job. As a graduation gift his father gave him $5000 as seed money for a down payment for a condominium that Joe plans to purchase in three years. Joe wants to invest his $5000 into a savings account that gives him the best rate. Bank A has an interest rate of 6.02% compounded quarterly. Bank B has an interest rate of 6% compounded monthly. Which bank's savings account should Joe go with so that he can earn the most money at the end of the three years? Hint: When P. is invested in a savings account for t years under the interest rate r (in decimal form), and the interest is compounded n times each year, and then the end balance is computed by P= P. (1+2)".
Part I: Joe just graduated from College and has found a nice job. As a graduation gift his father gave him $5000 as seed money for a down payment for a condominium that Joe plans to purchase in three years. Joe wants to invest his $5000 into a savings account that gives him the best rate. Bank A has an interest rate of 6.02% compounded quarterly. Bank B has an interest rate of 6% compounded monthly. Which bank's savings account should Joe go with so that he can earn the most money at the end of the three years? Hint: When P. is invested in a savings account for t years under the interest rate r (in decimal form), and the interest is compounded n times each year, and then the end balance is computed by P= P. (1+2)".
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 28P
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