Question

David invested $2000 in an account earning of 4% compound interest per year. Stephenie invested $1800 in an account earning 5% compound interest per year. Whose investment will be worth more in 8 years? How much more?

Answer 1

David. Around Rs 78

Explanation:

The Formula for compound interest is

A = P [ 1 + (R/100) ] ^ n

where P is the principle amount invested

R is the rate of interest and n is the number of years of investment

A is the accumulated amount after the investment time period

For David,

Amount (A1) = 2000 [ 1+ 0.04 ] ^ 8 = 2737.138

For Stephanie,

Amount (A2) = 1800 [ 1 + 0.05 ] ^ 8 = 2659.419

From this calculation A1 > A2, so the investment of David is more worth

The worth value is A1 - A2 = 77.719 = 78

Answer 2

Answer: Stephenie

Step-by-step explanation:

To calculate the future value of David's investment after 8 years:

FV = PV x (1 + r)^n

where FV is the future value, PV is the present value, r is the interest rate, and n is the number of years.

FV = 2000 x (1 + 0.04)^8

FV = 2000 x 1.3605

FV = $2,721

To calculate the future value of Stephenie's investment after 8 years:

FV = PV x (1 + r)^n

FV = 1800 x (1 + 0.05)^8

FV = 1800 x 1.4693

FV = $2,645.46

Therefore, Stephenie's investment will be worth more in 8 years by $75.54.