Answer:
The better deal would be simple interest rate of 3.2%
Step-by-step explanation:
In order to calculate which bank would be the better deal If Parker decides to deposit $7,000 for 25 years, we would have to make the following calculation:
A. simple interest rate of 3.2%.
Therefore, FV= P*r*t
=$7,000*3.2%*25
=$5,600.
B. compound interest rate of 3%
Therefore, FV=PV(1+r)∧n
FV=$7,000(1+0.03)∧25
FV=$14,656
The better deal would be simple interest rate of 3.2%
