Answer:
Step-by-step explanation:
The amount (A) resulting from principal P invested at simple interest rate r for t years is ...
A = P(1 +rt)
A = $100,000(1 +0.05·4) = $120,000
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The amount resulting from interest being compounded daily is ...
A = P(1 +r/360)^(365.25t)
A = $100,000(1.00013888...)^1461 = $122,495.31
The "Banker's rule" says the daily rate is based on 360 days per year. The actual interest is computed based on the exact number of days. In 4 years, there will be a leap year, so that's 1461 days.
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The investment with compounded interest earns more.
$122,495.31 -120,000.00 = $2,495.31
The difference in interest earned is $2,495.31.
