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COMPARING SIMPLE AND COMPOUND INTEREST
um and Britt each deposit $5,000 into accounts that earn 5% interest. Adam's account
Sunnual simple interest while Britt's account earns annual compouna inter
ITs account earns annual compound interest. The tables below
w how much interest is earned each year for the first 3 years in Adam and Britt's accounts.
ATT
Annual compound interest
ADAM
Annual simple interest
CALCULATION INTEREST
BRITT
INTEREST
CALCULATION
$250
$250
$262.50
$250
YEAR 1 5,000.05)
YEAR 2 5,0000.05)
YEAR 3 5,000(.05)
TOTAL INTEREST EARNED:
YEAR 1 5,000(.05)
YEAR 2 5,2500.05)
YEAR 3 5,512.500.05)
TOTAL INTEREST EARNED:
$275.63
$250
$788.13
$750
a. Who will earn more interest after three years, and how much more?
b. Using the tables to help, describe any differences you notice between how Adam and Britt':
interest amounts are calculated.