Concept explainers
a.
To calculate: The effective monthly interest rate for the saving account at XYZ savings.
a.
Answer to Problem 18PFA
So, then the effective monthly interest rate is 0.15%.
Explanation of Solution
Given: Sharonda is comparing the saving account that are offered at the two banks.
Concept Used:
Use the compound interest formula:
Where P is the initial investment, r is the interest rate , n is the number of times the interest compounds each year ,and t is the number of years
Calculation:
Here substitute
The effective monthly interest rate is then 1.0015-1=0.0015=0.15%.
So, then the effective monthly interest rate is 0.15%.
b.
To find: The bank which offer a better deal.
b.
Answer to Problem 18PFA
The bank which offer a better deal is XYZ Savings.
Explanation of Solution
Given: Sharonda is comparing the saving account that are offered at the two banks.
Calculation:
It is given that Statewide Financial has a monthly interest rate of 0.12% . From part (a). XYZ savings has an effective monthly interest of 0.15%. XYZ saving then offers a better deal since it has a higher monthly interest rate.
c.
To calculate: The effective annual interest rate for the saving account at Statewide Financial.
c.
Answer to Problem 18PFA
The effective annual interest rate is 1.4%.
Explanation of Solution
Given: Sharonda is comparing the saving account that are offered at the two banks.
Concept Used:
Use the compound interest formula:
Where P is the initial investment, r is the interest rate, n is the number of times the interest compounds each year ,and t is the number of years
Calculation:
Here substitute
The effective annual interest rate is then 1.014-1=0.014=1.4%.
Conclusion:
The effective annual interest rate is 1.4%.
d.
To identify: The bank out of three given banks Sharonda should choose.
d.
Answer to Problem 18PFA
Capital Street.
Explanation of Solution
Given: Sharonda is comparing the saving account that are offered at the two banks.
Use the compound interest formula:
Where P is the initial investment, r is the interest rate , n is the number of times the interest compounds each year ,and t is the number of years
Calculation:
Here, substitute
The effective annual interest rate is then 1.022-1=0.022=2.2%.
Conclusion:
This is higher than the annual interest of 1.8% for XYZ Savings and the effective annual interest rate of 1.4% for Statewide Financial so Capital Street is the bank she should choose.
Chapter 7 Solutions
Algebra 1, Homework Practice Workbook (MERRILL ALGEBRA 1)
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