Question

Jimmy deposits $4,500 into each of two savings accounts. Account 1 earns 5% annuy simple interest . Account 2 earns 5% interest compounded annually . Jimmy's does not make any additional deposits or withdrawals . What is the sum of the balances of Account 1 and Account 2 at the end of 4 years

Answer 1

Answer:

Step-by-step explanation:

Considering account 1, we would apply the formula for determining simple interest which is expressed as

I = PRT/100

Where

I represents interest paid on the amount of money deposited.

P represents the principal or amount of money deposited.

R represents interest rate on the deposit.

T represents the duration of the deposit in years.

From the information given,

P = $4500

R = 5%

T = 4 years

Therefore,

I = (4500 × 5 × 4)/100

I = $900

Total amount in account 1 is

4500 + 900 = 5400

Considering account 2, we would apply the formula for determining compound interest which is expressed as

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

Where

A = total amount in the account at the end of t years

r represents the interest rate.

n represents the periodic interval at which it was compounded.

P represents the principal or initial amount deposited

From the information given,

P = $4500

r = 5% = 5/100 = 0.05

n = 1 because it was compounded once in a year.

t = 4 years

Therefore,

A = 4500(1 + 0.05/1)^1 × 4

A = 4500(1.05)^4

A = $5470

The sum of the balances of Account 1 and Account 2 at the end of 4 years is

5400 + 5470 = $10870