Answer
(a) The compound interest account earns $\$474.55$ more.
(b) Generally, compound interest earns more than simple interest.
Work Step by Step
(a)
We calculate the total amount accumulated with interest ($\$10000$ at 5% for 10 years):
$10000*0.05*10+10000=\$15,000$
Now we use the table (pg. 453) to calculate the compound amount ($\$9500$ at 5% for 10 years):
$9500*1.6289=\$15,474.55$
We calculate the difference:
$15474.55-15000=\$474.55$
Thus the compound interest account earns $\$474.55$ more.
(b)
Generally, compound interest earns more than simple interest because interest is calculated on the initial principal as well as the accrued interest ("interest on interest").
