When calculating simple interest, the interest earned cannot earn any interest while in compound interest. The interest itself starts earning money when it is due.
This is the reason why compound interest gives a higher return.
We'll first find the maturity value of the CD at the end of 48 months ( 4years).
=4500 + 4500 ∗ 0.095 ∗ 4 = 6210
She will invested $6210 into the mutual fund
h= After 10 years
R= 21% compound interest
P(1 + R/100) h
6210 (1+21/100) 10 (note that it is raise to power 10
when you use your calculator to sum the above together, it will give you.
$ 41,777.75
Conclusively, the mutual fund worth after 10 years is $ 41,777.75.
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