Question

Betty put $1,450 in a savings account 5 years ago that paid 4 percent simple interest each year. How much more could she have earned over this 5-year period if the interest had compounded annually?

A) $35.16

B) $120.73

C) $24.15

D) $28.12

E) $20.32

Answer 1

A/c balance after 5 years - Annual compounding	$     1,764.15	=1450*(1+4%)^5
Less:
A/c balance after 5 years - Simple interest	$     1,740.00	=1450*(1+4%*5)
More balance in annual compounding	$ 24.15