Question

Jessica's friend Tyshaun found an account that earns 2.5 percent interest compounded annually. Tyshaun made an initial deposit of $100 into this account at the same time Jessica made a deposit of $100 into her account. After 10 years, how much more money will Tyshaun's initial deposit have earned than Jessica's initial deposit? (Round your answer to the nearest cent and ignore the dollar sign when gridding your response.)

Answer 1

6.11

Explanation:

Calculations for Jessica:

The initial deposit made by Jessica in the account = $100

The interest rate on Jessica’s account = 2 Percent

Value of Jessica’s initial deposit after 10 years = 100 (1+0.2)

= 100 (1.02)

The interest rate can be calculated with the formula = 100 (1.02) ^10

= 121.89

= $121.89

Note: we got the value 0.2 by multiplying 2 with 12 and dividing by 100.

Now, for Tyshaun:

The initial deposit made by Tyshaun in the account = $100

The interest rate on Tyshaun’s account = 2.5 Percent

Value of Tyshaun’s initial deposit after 10 years = 100 (1+0.25)

= 100 (1.025)

The interest rate can be calculated with the formula = 100 (1.025) ^10

= 128.008

= $128.008

Therefore, the initial deposit of Jessica earned $21.899 while Tyshaun’s initial deposit earned $28.008. Hence, expressing the money in nearest cents, Tyshaun’s initial deposit grossed $6.11 more than that of jessica’s initial deposit.