Question

Anne deposited $500 in an account that earns 6% simple annual interest. Shelly deposited $500 in an account that earns 6% annual interest compounded annually. They leave the money in the account for 4 years. Which statement is true about the two investments after 4 years?

Answer 1

Answer:

It is clear that, The Shelly account is $11.23 more than that in Anne account .

Step-by-step explanation:

Given as :

For Anne

The amount deposited in account = p = $500

The rate of interest = r = 6%  at simple interest

The time period of deposit = t = 4 years

Let The amount received in account after 4 years = $$A_1$

From Simple Interest method

Simple Interest = $\dfrac{\textrm principal\times \textrm rate\times \textrm time}{100}$

Or, s.i = $\dfrac{\textrm p\times \textrm r\times \textrm t}{100}$

Or, s.i = $\dfrac{\textrm 500\times \textrm 6\times \textrm 4}{100}$

Or, s.i = $\dfrac{12000}{100}$

i.e s.i = $120

∵ Amount = Principal + Interest

Or, $A_1$ = p + s.i

Or $A_1$ = $500 + $120

Or, Amount = $620

So, The Amount in Anne account after 4 years is $620

Again

For, Shelly

The amount deposited in account = P = $500

The rate of interest = R = 6% compounded annually

The time period of deposit = T = 4 years

Let The amount received in account after 4 years = $$A_2$

From Compound Interest method

Amount = Principal × $(1+\dfrac{\textrm rate}{100})^{\textrm time}$

Or, $A_2$ = P × $(1+\dfrac{\textrm R}{100})^{\textrm T}$

Or, $A_2$ = $500 × $(1+\dfrac{\textrm 6}{100})^{\textrm 4}$

Or, $A_2$ = $500 × $(1.06)^{4}$

Or, $A_2$ = $500 × 1.26247

Or, $A_2$ = $631.23

So, The amount received by Shelly in her account after 4 years = $631.23

Now, Difference between amount received in their account

i.e  $A_2$ -  $A_1$ = $631.23 - $620

Or, $A_2$ -  $A_1$ = $11.23

Hence, It is clear that, The Shelly account is $11.23 more than that in Anne account . Answer