Question

Brian invests $10,000 in an account earning 4% interest, compounded annually for 10 years. Five years after Brian's initial investment, Chris invests $10,000 in an account earning 7% interest, compounded annually for 5 years. Given that no additional deposits are made, compare the balances of the two accounts after the interest period ends for each account. (round to the nearest dollar)

Answer 1

Brian will get 40,000 then Chris will get 70,000

Answer 2

Compound interest formula is
`A = P(1+r)^t`

Where P is the principal amount

r is the rate of interest

t is number of years

Brian invests $10,000 in an account earning 4% interest, compounded annually for 10 years

P = 10,000 , r= 4% = 0.04 , t =10

Plug in all the values

`A = 10000(1+0.04)^(10)` = 14,802.44

Chris invests $10,000 in an account earning 7% interest, compounded annually for 5 years.

P = 10,000 , r= 7% = 0.07 , t =5

Plug in all the values

`A = 10000(1+0.07)^5` = 14,025.52

Brian balance after the interest period = $ 14,802.44

Chris balance after the interest period = $ 14,025.52

Balance in Brian's account is more than Chris account