Cedric has deposited 12,000 into an account that pays 5% interest compounded annually.
Daniel has deposited 12,000 into an account that pays 7% interest compounded annually.
In 15 years Cedric and Daniel compare their respective balances. To the nearest dollar, what is the positive difference between their balances?
+592 A = P(1 + r/n)nt
where,
A = final amount
P = initial investment
r = interest rate
n = number of times interest is applied
t = number of time periods
Cedric:
A = P(1 + r/n)nt
= 12000(1 + 0.05/1)(1*15)
= 12000(1.05)15
≈ 12000(2.0789)
≈ $24 947.14
Daniel:
A = P(1 + r/n)nt
= 12000(1 + 0.07/1)(1*15)
= 12000(1.07)15
≈ 12000(2.759)
≈ $33 108.38
33108.38 - 24947.14 = $8161.24, which is your answer :)
