Math

Compound interest is a type of exponential growth. Now imagine that

Lisa and Elicia each opened a new compound interest account.
Lisa deposited $20,000 into her compound interest account.
Elicia deposited $15,000 into her compound interest account.
Both accounts pay 5% interest annually.
No further deposits are made to the accounts and no withdrawals are made.
After 20 years, how much more interest would Lisa’s account earn than Elicia’s account? Round your answer to the nearest dollar.

~So dont i just change the percentage to a decimal, to 0.05. Then I would do 20000(0.05)^20 and 15000(0.05)^20? I dont know what to do after that.

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  1. 20000*1.05^20 - 15000*1.05^20
    = (20000-15000)*1.05^20
    = 5000 * 1.05^20

    or, consider that the difference is just the amount f interest earned by the extra $5000 that Lisa deposited.

    5000*1.05^20

    Note that the growth factor is 1.05, not just .05, since .05 gets smaller and smaller when raised to powers.

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