Answer: the account that earned compound interest has the greater balance at the end of four years.
Step-by-step explanation:
The formula for determining simple interest is expressed as
I = PRT/100
Where
I represents interest paid on the amount invested.
P represents the principal or amount invested.
R represents interest rate
T represents the duration of the investment in years.
From the information given,
P = 1000
R = 4%
T = 4 years
I = (1000 × 4 × 4)/100 = 160
Total amount earned is
1000 + 160 = $1160
The formula for determining compound interest 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 = 1000
r = 4% = 4/100 = 0.04
n = 1 because it was compounded once in a year.
t = 4 years
Therefore,.
A = 1000(1+0.04/1)^1 × 4
A = 1000(1.04)^4
A = $1170
