Business Math

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. Mystic for last two years
B. Mystic
C. Four Rivers
D. Four Rivers for first two years

Answer: A??

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asked by Ash
  1. I don't have your handbook, but
    all you have to do is to compare the equivalent annual rates of the two accounts.
    No tables are needed

    annual rate for 12% per annum compounded quarterly
    = (1+.12/4)^4 = 1.1255% represents 12.55%

    annual rate for 14% compounded semi-annually
    = (1 + .14/2)^2 = 1.1449 represents 14.49%

    so clearly C

    choice A and D are mere distractors.

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    posted by Reiny

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