Question

First bank pays 7 percent simple interest on its investment accounts. If second bank pays interest on its accounts compounded annual, what rate should the bank set if it wants to match first bank over an investment horizon of 10 years?

Answer 1

Let the investment be $100 (or any amount you feel like)
At simple interest:
Amount = 100 + 100*.07*10 = 170

Compound interest: let the rate be i
100(1+i)^10 = 170
(1+i)^10 = 1.7
take 10th root
1+i = 1.7(1/10) = appr 1.0545
so the rate is appr 5.45%

Answer 2

Nepali transalate

Answer 3

Alternative solution

Answer 4

Different method