Beatrice invests $2,500 in an account that pays 4 percent simple interest.How much more could she have earned over a 5-year period if the interest had compounded annually?

Question

Quizplus · Accepted Answer

Ending value _{Simple interest} = $2,500 + ($2,500 × .04 × 5)= $3,000.00Ending value _Compounded = $2,500 × (1 + .04)⁵ = $3,041.63 Difference = $3,041.63 - 3,000.00 = $41.63

Beatrice Invests $2,500 in an Account That Pays 4 Percent