00:01
The compound interest formula is a is equal to p times 1 plus r over n to the n t, where a is the final amount, p is the principal amount, r is the interest rate as a decimal, n is the number of times per year, that interest is compounded, and t is the time in years.
01:25
To solve this problem, we can use this formula to find out how much interest you will need to pay for each bank.
01:33
In this formula, we don't need to worry about p or t, as this information isn't important in our problem.
01:45
For bank a, we know that the amount, the final amount of interest we need to pay is equal to 1.
01:59
Plus an interest rate of 0 .064, compounded annually or one time per year, to the 1.
02:13
This gives us a is equal to 1 .064, and don't forget to add the dollar sign.
02:34
For bank b, we know that a is equal to 1 plus an interest, rate of 0 .063 compounded monthly or 12 times a year to the 12.
03:00
This is equal to plugging this entire equation into my calculator around 1.
03:11
I forgot to add the dollar sign again...