Huan deposited $850 into a collegesavings account earning 4.8% interestcompounded annually. He also deposited$850 into a second account earning 4.8%simple interest. He made no additionaldeposits. After 10 years, which account earnedmore interest? How much more?

Question

A The account with compounded interest earned
$1,0004.10 more interest.
B The account with the simple interest earned
$1,004.10 more interest.
C The account with the simple interest earned
$100.41 more interest.
D The account with compounded
interest earned $100.41 more
interest.

I am really having trouble with this and cant guess a thing.

Answer 1

Compounded Int.

P1 = Po(1+r)^n

r = 4.8%/100 = 0.048 = Annual % rate expressed as a decimal.

n = 1Comp./yr. * 10Yrs. = 10 Compounding
periods.

P1 = 850(1.048)^10 = $1358.41

Simple Int.

P2 = Po + Po*r*t = 850 + 850*0.048*10 =
$1258.00

P1-P2 = 1358.41 - 1258 = $100.41