00:02
Hi there, in this problem, which is given that kate has $5 ,500 with her and she wants to put it in a bank for 15 years.
00:11
The two banks are given having the interest, neighborwood bank, 1 .2 % compounded annumny, and for beautiful day bank, it is 1 .2 % compounded daily.
00:22
Now we have to suggest a bank to gain based on the interest paid by these banks.
00:29
So let us start with the problem.
00:30
The formula for compound interest is given by p multiplied by 1 plus r raised to the power n minus p.
00:50
So using this formula, we can find the compound interest paid by the neighborhood bank where the interest is compounded annually.
01:06
Now in this case, the principal is 5 ,500.
01:13
The rate of interest is 1 .2 % which is equal to 0 .012 and the number of period is t equals 15 years as the interest is compounded annually and we have 15 years of time.
01:34
So now using these values in the above formula we will get the interest paid by the bank is equal to 5 ,500.
01:49
Multiplied by 1 plus 0 .012 raised to the power 15 minus 5 ,500.
02:00
And on calculation this gives 5 ,500 multiplied by 1 .012 raised to the power 15 minus 5 ,500.
02:15
This is equal to 6 ,57 .644 minus 5 ,500 and finally we have the interest paid by bank is equal to $1 ,77 .64.
02:37
Now we will find the interest paid by the dutiful day bank where the interest is compounded daily.
02:48
So for that the interest is compounded daily...