Answer:
Step-by-step explanation:
Considering Betty's account
Initial amount deposited into the account is $300 This means that the principal is
P = 300
It was compounded annually. This means that it was compounded once in a year. So
n = 1
The rate at which the principal was compounded is 5%. So
r = 5/100 = 0.05
It was compounded for 2 years. So
t = 2
The formula for compound interest is
A = P(1+r/n)^nt
A = total amount in the account at the end of t years. Therefore
A = 300 (1+0.05/1)^1×2
A = 300(1.05)^2 = $330.75
Considering Theresa's account,
The formula for simple interest is expressed as
I = PRT/100
Where
P represents the principal
R represents interest rate
T represents time
P = 300
R = 5%
T = 2
I = (300 × 5 × 2)/100 = 30
Total amount in Theresa's account after 2 years will be 30 + 300 = $330
Betty would earn more than Theresa. She will earn 330.75 - 330 = $0.75 more than Theresa.
