The local bank pays 4% annual interest on savings deposits. in a nearby town, the bank pays 1% per quarter. a man who has $3,425 to deposit wonders whether the higher interest paid in the nearby town justifies driving there. if all money is left in the account for 4 years, how much more interest would he obtain if the out-of-town bank was chosen? (calculate the difference of obtained interests)

The local bank is the best option.

Explanation:

Giving the following information:

The local bank pays a 4% annual interest on savings deposits. In a nearby town, the bank pays 1% per quarter. A man who has $3,425 to deposit wonders whether the higher interest paid in the nearby town justifies driving there. The money is left in the account for 4 years.

Which bank is better?

Local bank:

FV= PV*(1+i)^n

FV= 3425*(1.04)^4= $4,006.77

Interest= $581.77

Nearby town bank:

n= 3*4= 12 quarters

FV= 3425*(1.01^12)= $3859.38

Interest= 434.38

if you use only 25 for your entertainment and only 200 for the groceries that you really need and take out the 50 per month for the computer then that should be enough