Question

planters bank pays 5 percent simple interest on its savings account balances, whereas centura bank pays 5 percent compounded annually. if you made a $12,000 deposit in each bank, how much more money would you earn from your centura bank account at the end of 20 years?
$7,155.84
$7,839.57
$7,960.47
$8,400.09
$8,784.14

Explanation:

Step1: Calculate simple interest (Planters)

Simple interest formula: $I_s = P \times r \times t$
$I_s = 12000 \times 0.05 \times 20 = 12000$
Total for Planters: $12000 + 12000 = 24000$

Step2: Calculate compound amount (Centura)

Compound amount formula: $A_c = P(1+r)^t$
$A_c = 12000(1+0.05)^{20} = 12000 \times 2.65329770514 = 31839.57$

Step3: Find interest difference

Interest from Centura: $31839.57 - 12000 = 19839.57$
Difference: $19839.57 - 12000 = 7839.57$

Answer:

$7,839.57$