Bunuel wrote:
If $1000 is placed into account X, yielding 10% interest compounded annually and $1000 is placed into account Y using 10% simple annual interest, how much more will be in account X than in account Y at the end of 5 years?
A. $0
B. $100
C. $110.51
D. $133.31
E. $146.41
Approximate:
In 1st year, both interests will be the same at $100 each.
In 2nd year, CI will be $10 extra (10% interest on previous interest of $100)
In 3rd year, CI will be $21 extra (10% interest on previous interest of $100 + $110 = $210)
It's already obvious that the answer will be 110.51 (= 10 + 21 + approx (30 + a bit extra) + approx (40 + a bit extra)).
else calculate for last 2 years too.
In 4th year, CI will be $33 extra (10% interest on previous interest of $210 + $121 = $331)
In 5th year, CI will be $46 (10% interest on previous interest of $331 + $133 = $464)
Total extra = 10 + 21 + 33 + 46 = $110
I don't fully understand how you get to YR3 interest. I thought the interest payments would be as follows