Question

Davis puts $5,000 each year in an account that earns 5% annual interest, compounded annually. His brother Mike puts $5,000 each year in a safe in his bedroom. After the first 10 years of doing this, how much more money does Davis have than Mike? Round your answer to the nearest dollar.

A) $20,524

B) $2,500

C) $31,445

D) $8,144

Answer 1

$20,524

Explanation:

Davis: each year he adds $5,000 and he earns 5%.

1: 5,000(1.05) = 8,144.47

2: 13,144.47(1.05) = 13,801.69

3: 18,801.69(1.05) = 19,741.78

4: 24,741.78(1.05) = 25,978.87

5: 30,978.87(1.05) = 32,527.81

6: 37,527.81(1.05) = 39,404.20

7: 44,404.20(1.05) = 46,624.41

8: 51,624.41(1.05) = 54,205.63

9: 59,205.63(1.05) = 62,165.91

10: 67,165.91(1.05) = 70,524.21

Mike: he saves $5,000 each year, no interest.

$5,000 · 10 = $50,000

$70,524.21 − $50,000 = $20,524

Answer 2

I think the answer would be A, sweetie.