A bank offers two different types of interest on saving accounts account 1 pays 5.5 % simple interest
account 2 pays 5% interest compounded annually
deposits of 1000 are made into the accounts of each type. no additional Including
withdraws or deposits are made.
what amount is the closest to the interest earned in 5 years.

(a) The closet to the simple interest eaened in 5 years is $275.00.

(b) The closet to the compound interest earned in 5 years is $276.28.

Step-by-step explanation:

These can be determine as follows:

(a) Simple Interest

The interest earned and be determined using the simple interest formula as follows:

Simple interest = P * R * T (1)

Where;

P = Principal = $1,000

R = interest rate = 5.5%

T = term = 5

Substituting the values into equation (1), we have:

Simple interest = $1,000 * 5.5% * 5 = $275.00

(b) Compound Interest

The interest earned and be determined using the compound interest formula as follows:

Compound interest = P(1 + R)^T - P (2)

Where;

P = Principal = $1,000

R = interest rate = 5%, or 0.05

T = term = 5

Substituting the values into equation (2), we have:

Compound interest = $1,000(1 + 0.05)^5 - $1,000 = ($1,000 * 1.05^5) - $1,000 = ($1,000 * 1.2762815625) - $1,000 =$1,276.28 - $1,000 = $276.28

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step-by-step explanation: