Answer:
Due to compound interest, the total return on both investments is significantly higher than the original principal.
Explanation:
Both accounts model compound interest growth. Compound interest is a type of growth in which the interest earned on an investment is added to the principal, so that the interest earned in the future is based on a higher principal. In both of the accounts you described, the interest is compounded at a specific frequency (quarterly in Account A and monthly in Account B) over a number of years. This means that the interest earned on the investment is added to the principal at regular intervals, and the interest earned in the future is based on the new, higher principal.
To calculate the total return on an investment that compounds interest, you can use the following formula:
Total Return = Principal * (1 + Interest Rate/Number of Compoundings per Year) ^ (Number of Years * Number of Compoundings per Year)
For example, to calculate the total return on Account A after 10 years, you would use the following formula:
Total Return = $16,000 * (1 + 0.03/4) ^ (10 * 4) = $22,217.33
To calculate the total return on Account B after 10 years, you would use the following formula:
Total Return = $16,000 * (1 + 0.03/12) ^ (10 * 12) = $22,303.47
In both cases, the total return on the investment is significantly higher than the initial principal, due to the compounding of the interest.