Problema Solution
If I invest $1000 on June 1st in a savings account that pays 10% interest compounded every month, and I invest $1000 (on the same day) in an account which pays 10% interest that is compounded continuously:
Which will be worth more in one year?
Answer provided by our tutors
Amount invested in compound interest = 1000
Amount invested in simple interest = 1000
Interest earned in simple interest = 1000*10*1/100 = 100
Interest earned in compund interest case = 1000(1+10/1200)^12 - 1000= 1104.7 - 1000 = 104.7
=> Compound interest will earn more