Answered

Bank X offers a savings account at 5% interest, compounded quarterly. Bank Y offers a savings account at 4% interest, compounded continuously. If you invest $2,000 initially and make no more transactions for 2 years, which bank account would have more money, and by how much?



Answer :

Answer:

Bank X,  by $42.40 to the nearest cent.

Step-by-step explanation:

Bank X:

Amount after 2 years = 2000(1 + 0.05/4)^(2*4)

                                    = 2208.972

Bank Y:

Amount after 2 years  = 2000(e^(0.04*2))

                                    = 2166.574

Difference = 2208.972 - 2166.574

                  = 42.398

                   = $42.40 to the nearest cent.