Judah is going to deposit $5,000 in an account that earns 4% interest for 20 years. How much more interest will he earn if the account earns annual compound interest rather than annual simple interest?

If the account earns annual compound interest rather than annual simple interest, the account earns extra $1955.62

Step-by-step explanation:

Given :

Principal amount P = $5000

Annual interest rate r = 4% = 4/100 = 0.04

time t = 20 years

First we have to calculate account balance when account earns annual simple interest. We know that the formula is

A = P(1+rt)

   = 5000 (1+ (0.04 x 20))

   = 5000 (1.8)

   = 9000

Interest earned for annual simple interest = 9000 - 5000

                                                                        = 4000

Now we will calculate account balance when account earns annual compound interest. The formula is

A = P

Since here interest is compounded annually, n =1, hence we get

A = P

   = 5000

   = 10955.62

Interest earned for annual compound interest = 10955.62 - 5000

                                                                                = 5955.62

The extra interest earned = 5955.62 - 4000

                                          = 1955.62

Hence f the account earns annual compound interest rather than annual simple interest, the account earns extra $1955.62

i am unable to solve this problem

step-by-step explanation: