you have two account choices to invest $10000 for 20 years. the first account accrued SIMPLE interest at a rate of 10%. The other account accrued COMPOUND interest, but at a rate of 5%
Let's calculate the total amount of money accumulated in each account after 20 years.
1. Simple Interest Account:
Principal (P) = $10,000
Rate (r) = 10%
Time (t) = 20 years
Simple Interest formula: I = P * r * t
I = $10,000 * 0.10 * 20
I = $10,000 * 2
I = $20,000
Total amount after 20 years = P + I
Total amount = $10,000 + $20,000
Total amount = $30,000
2. Compound Interest Account:
Principal (P) = $10,000
Rate (r) = 5%
Time (t) = 20 years
Compound Interest formula: A = P * (1 + r)^t
A = $10,000 * (1 + 0.05)^20
A = $10,000 * (1.05)^20
A = $10,000 * 2.653297705
A = $26,532.98
Total amount after 20 years = A
Total amount = $26,532.98
Therefore, after 20 years, the Simple Interest account will have $30,000 and the Compound Interest account will have $26,532.98. The account with simple interest at a rate of 10% will yield a higher return over 20 years compared to the account with compound interest at a rate of 5%.