The formula for simple interest is Principal x Rate x Time.
For simple interest, the balance after 7 years can be calculated as:
Balance = 12,000 x (1 + 0.05 x 7)
= 12,000 x (1 + 0.35)
= 12,000 x 1.35
= $16,200.
The formula for compound interest is P(1 + r/n)^(nt), where P is the principal, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years.
For compound interest, the balance after 7 years can be calculated as:
Balance = 12,000 x (1 + 0.045/1)^(1 x 7)
= 12,000 x (1 + 0.045)^7
= 12,000 x (1.045)^7
= $16,583.63.
Comparing the two balances, the best balance after investing $12,000 for a period of 7 years is $16,583.63.