Question

Two savings accounts were each opened with a $5,000 deposit. Account A earns simple interest at a 1% annual interest rate. Account B earns compound interest at a 1% annual interest rate compounded yearly. No other deposits or withdrawals are made from the accounts for 4 years. What is the difference in interest earnings between the two accounts after 4 years?

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Answer 1

Explanation:

Answer 2

Compound interest is interest paid on interest. ... The longer you invest your money, the higher your interest payments will grow, not only on your original amount but on the additional interest you earn each year. This is what makes compounding interest so powerful.

Explanation:

1/1: Interest rates are always expressed as a percentage over an annual time period. 1/2:When interest is compounded annually, the amount of money accumulated in one year is the same under either a simple or compound interest scenario.