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. All else equal, Jamie made the better investment.

Question

Quizplus · Accepted Answer

Jamie's investment grows faster due to compound interest, where interest is earned on both the initial principal and the accumulated interest from previous periods, unlike Chris's simple interest investment, which only earns interest on the principal amount.

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