Question

NEED HELP ASAPPPPPPPPP Luis deposits $1000 in savings account A earning 8%

simple interest, and $800 in savings account B earning 5%
compound interest. Which account has more after 10 years,
and what is the difference?

A: Account A will have 496.88 more
B: Account A will have 400 more
C: Account B will have 503.12 more
D: Account B will have $200 less

Answer 1

9514 1404 393

Answer:

A: A has $496.88 more

Explanation:

A graphing calculator works this problem nicely.

The balance in the simple interest account after t years is ...

A = 1000(1 + 0.08t)

The balance in the compound interest account after t years is ...

B = 800(1 +0.05)^t

The larger starting balance and the higher interest rate keep the A account balance higher than the B account balance for more than 29 years. Then, the effect of interest compounding takes over. Until then, account A has more money in it. The calculator shows Account A has $496.88 more after 10 years.