Jane is having difficulty deciding whether to put her savings in the Mystic Bank or in the Four Rivers Bank. Mystic offers a 12% rate compounded quarterly, and Four Rivers offers 14% compounded semiannually. Jane has $40,000 to invest and expects to withdraw the money at the end of five years. Using the tables in the Business Math Handbook that accompanies the course textbook, determine which one of the following is the best deal.

A. Four Rivers

B. Mystic

C. Mystic for last two years

D. Four Rivers for first two years

Question

Mathematics

Guest

23 November, 21:27

Jane is having difficulty deciding whether to put her savings in the Mystic Bank or in the Four Rivers Bank. Mystic offers a 12% rate compounded quarterly, and Four Rivers offers 14% compounded semiannually. Jane has $40,000 to invest and expects to withdraw the money at the end of five years. Using the tables in the Business Math Handbook that accompanies the course textbook, determine which one of the following is the best deal.

A. Four Rivers

B. Mystic

C. Mystic for last two years

D. Four Rivers for first two years

+1

Answers (1)

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Ronald Hawkins · Answer 1

The answer to this question would be B. Mystic

Since the rate should be constant, option C and D wouldn't be true.

If the Four Rivers bank gives 12% per year and Mystic Bank gives 14% per year, it will be 3% per quarter year for Four Rivers Bank and 7% semiannually for Mystic Bank.

The total rate would become:

Four rivers 103%^4 = 1.125

Mystic : 107%^2 = 1.145