You invested $1,400 in an account that pays 5 percent simple interest.How much more could you have earned over a 20-year period if the interest had compounded annually?
A)$749.22
B)$830.11
C)$882.19
D)$901.15
E)$914.62

Question

Quizplus · Accepted Answer

Simple interest = $1,400 + ($1,400 × .05 × 20) = $2,800Annual compounding = $1,400 × (1.05)²⁰ = $3,714.62Difference = $3,714.62 - $2,800 = $914.62

You Invested $1,400 in an Account That Pays 5 Percent