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\"Scuba Steve has $4,800 that he wants to invest for 4 years. He can invest this

ID: 2742104 • Letter: #

Question

"Scuba Steve has $4,800 that he wants to invest for 4 years. He can invest this amount at his credit union and earn 4 percent simple interest. Or, he can open an account at Compass Bank and earn 3.65 percent interest, compounded annually. If he decides to invest at Copmpass Bank for 4 years, he will: " earn $15.02 more than if he had invested with his credit union earn $27.89 less than if he had invested with his credit union. earn the same amount as if he had invested with the credit union. "have a total balance of $4,992 in his account after one year." "have a total balance of $4,876 in his account after one year."

Explanation / Answer

simple interest earned at credit union = 4800 *4* 4/100 = 768

total future value = 4800 + 768= 5568

at compass bank

future value = present value * (1+interest rate)^n

= 4800 * (1+3.65%)^4

= 5540.11

he will have a total balance of 4992 in his account after one year