Question

Conner has $875 to deposit into two different savings accounts. He will deposit $500 into Account #1, which earns 3% annual simple interest. He will deposit $375 into Account #2, which earns 3.5% interest compounded annually. After two years, what will the difference be between the Amounts in the two Accounts? PLEASE HURRY

Answer 1

The difference between the amounts in the two accounts, after two years is
`\$128.29`

Explanation:

Account #1

we know that

The simple interest formula is equal to

`A=P(1+rt)`

where

A is the Final Investment Value

P is the Principal amount of money to be invested

r is the rate of interest

t is Number of Time Periods

in this problem we have

`t=2\ years\\ P=\$500\r=3\%=3/100=0.03`

substitute in the formula above

`A_1=500(1+0.03*2)`

`A_1=500(1.06)`

`A_1=\$530`

Account #2

we know that

The compound interest formula is equal to

`A=P(1+(r)/(n))^(nt)`

where

A is the Final Investment Value

P is the Principal amount of money to be invested

r is the rate of interest in decimal

t is Number of Time Periods

n is the number of times interest is compounded per year

in this problem we have

`t=2\ years\\ P=\$375\r=3.5\%=3.5/100=0.035\\n=1`

substitute in the formula above

`A_2=375(1+(0.035)/(1))^(1*2)`

`A_2=375(1.035)^(2)`

`A_2=\$401.71`

Find the difference between the amounts in the two accounts

`A_1=\$530`

`A_2=\$401.71`

`A_1-A_2=\$530-\$401.71=\$128.29`