Jamie deposits $1,000 into an account that pays 4% interest compounded annually. Chris deposits
$1,000 into an account that pays 4% simple interest. Both deposits were made today. At the end of
ﬁve years, Chris will have more money in his account than Jamie has in hers.

Question

Quizplus · Accepted Answer

Chris will earn simple interest at a rate of 4% per year on his deposit and will have $1,200 in his account after 5 years. Jamie will earn compounded interest at a rate of 4% per year, but it is not specified how often interest is compounded. However, even if interest is compounded annually, Jamie will only have $1,217.14 in her account after 5 years. Therefore, Chris will have more money in his account than Jamie.

Jamie Deposits $1,000 into an Account That Pays 4% Interest