scenario: in one year, a bank pays 2% interest on a $1,000 deposit. the same year, the bank charges 12%…

scenario: in one year, a bank pays 2% interest on a $1,000 deposit. the same year, the bank charges 12% interest on a $1,000 loan. how much profit does the bank make at the end of the year in this scenario? $100 $120 $140 $2,000

scenario: in one year, a bank pays 2% interest on a $1,000 deposit. the same year, the bank charges 12% interest on a $1,000 loan. how much profit does the bank make at the end of the year in this scenario? $100 $120 $140 $2,000

Answer

Explanation:

Step1: Calculate interest paid on deposit

The interest - paid formula is $I = Prt$. Here, $P=$1000$, $r = 0.02$ (2% expressed as a decimal), and $t = 1$ year. So, $I_{deposit}=1000\times0.02\times1=$20$.

Step2: Calculate interest earned on loan

Using the same formula $I = Prt$, with $P = 1000$, $r=0.12$ (12% expressed as a decimal), and $t = 1$ year. So, $I_{loan}=1000\times0.12\times1=$120$.

Step3: Calculate bank profit

Profit $P$ is the interest earned on the loan minus the interest paid on the deposit. So, $P=I_{loan}-I_{deposit}=120 - 20=$100$.

Answer:

$100$