compare simple inerest at 3% and compound interest at 2%

Answer 1

To compare the simple interest at 3% and compound interest at 2%, let's assume we are considering a principal amount of $1000 invested for 1 year.

1. Simple Interest at 3%:
The formula to calculate simple interest is: I = P * r * t
Where:
I = Interest earned
P = Principal amount
r = Rate of interest
t = Time period

In this case, P = $1000, r = 3%, and t = 1 year.
I = 1000 * 0.03 * 1 = $30

So, the simple interest earned at 3% for 1 year on $1000 is $30.

2. Compound Interest at 2%:
The formula to calculate compound interest is: A = P * (1 + r/n)^(n*t)
Where:
A = Final amount (including interest)
P = Principal amount
r = Rate of interest
n = Number of compounding periods per year
t = Time period

In this case, P = $1000, r = 2%, n = 1, and t = 1 year.
A = 1000 * (1 + 0.02/1)^(1*1) = $1020

So, the compound interest earned at 2% for 1 year on $1000 is $20.

Comparing the two scenarios, the simple interest at 3% yields a higher interest amount ($30) compared to the compound interest at 2% ($20).