Ashley is comparing banks. She has $1,055 to put into a savings account. Bank #1 offers her an annual interest rate of 4.6%, while bank #2 offers her a monthly interest rate of 0.3%. If she leaves the money in the account for 2 years, which bank will she earn more interest with?
We can start by calculating the interest earned with Bank #1 after 2 years:
Interest with Bank #1 = Principal x Rate x Time
= $1,055 x 0.046 x 2
= $97.12
Now let's calculate the interest earned with Bank #2. Since Bank #2 offers a monthly interest rate, we need to convert the annual rate to a monthly rate:
Monthly rate = (1 + Annual rate)^(1/12) - 1
= (1 + 0.03)^(1/12) - 1
= 0.002462
Using this monthly rate, we can calculate the interest earned after 2 years:
Interest with Bank #2 = Principal x Monthly rate x Number of months
= $1,055 x 0.002462 x 24 x 12
= $103.19
Therefore, Ashley will earn more interest with Bank #2, which offers a monthly interest rate of 0.3%.