Question

practice problems corequisite n.3 name (2) some checking accounts pay a small amount of interest on the money in the account. in this case, interest is money that is paid to the account holder by the financial institution issuing the checking account. the interest is a percentage of the amount of money in the account. the percentage is called the annual interest rate. compare the following two offers. bank of avalon pays 0.8% with no annual fee. cypress savings pays 1.5%, but charges a $10 annual fee. which bank would be the better offer if you have $1,000 in an account for one year? use the writing principle with your calculations to defend your answer.

Explanation:

Step1: Calculate interest for Bank of Avalon

The formula for simple interest is $I = P \times r \times t$, where $P$ is principal, $r$ is rate (decimal), $t$ is time. Here, $P = 1000$, $r = 0.8\% = 0.008$, $t = 1$.
$I_{Avalon} = 1000 \times 0.008 \times 1 = 8$
Since no fee, total amount: $1000 + 8 = 1008$

Step2: Calculate interest for Cypress Savings

Using $I = P \times r \times t$, $P = 1000$, $r = 1.5\% = 0.015$, $t = 1$.
$I_{Cypress} = 1000 \times 0.015 \times 1 = 15$
Subtract annual fee: $15 - 10 = 5$
Total amount: $1000 + 5 = 1005$

Step3: Compare total amounts

Avalon total: $1008$, Cypress total: $1005$. Since $1008 > 1005$, Bank of Avalon is better.

Answer:

Bank of Avalon is the better offer. For $1000$ in one year, Bank of Avalon gives a total of $1008$ (interest $8$, no fee), while Cypress Savings gives $1005$ (interest $15$ minus $10$ fee).