Question

You have $25,000 to invest. You can find an account (Acount A) that guarantees $925 per year. You also found a simple interest account (Account B) that pays 6.5 percent annually. Which account will earn more in interest in 5 years? How much more did the account earn?

Answer 1

Account A
A=p+i
A=25,000+(925×5)
A=29,625

Account B
A=p(1+rt)
A=25,000×(1+0.065×5)
A=33,125

How much more did the account B earn
33,125−29,625
=3,500