For the simple interest option, the interest earned would be calculated using the formula:
Interest = Principal * Rate * Time
Where:
Principal = $6,700
Rate = 6.5% = 0.065
Time = 3 years
Interest = 6700 * 0.065 * 3 = $1,301.50
For the compound interest option, the interest earned would be calculated using the formula:
Interest = Principal * (1 + Rate)^Time - Principal
Interest = 6700 * (1 + 0.06)^3 - 6700 = $1,313.70
The difference between the two interest earning types is:
Difference = Compound Interest - Simple Interest
Difference = $1,313.70 - $1,301.50 = $12.20
Therefore, the difference between the two interest earning types is $12.20.
Aria is investing $6,700 of her savings from her summer job for her college fund. She is planning to invest the amount for 3 years and can choose between simple interest at 6.5% and compound interest at 6%. Find the difference between the two interest earning types to help Aria decide which investing option is best for her.(1 point)
3 answers
these are the option ;
Aria should invest with 6.5% simple interest because it will result in $26.69 more in interest earnings.
Aria should invest with 6.5% simple interest because it will result in $187.26 more in interest earnings.
Aria should invest with 6% compound interest because it will result in $86.76 more in interest earnings.
Aria should invest with 6% compound interest because it will result in $73.81 more in interest earnings.
Aria should invest with 6.5% simple interest because it will result in $26.69 more in interest earnings.
Aria should invest with 6.5% simple interest because it will result in $187.26 more in interest earnings.
Aria should invest with 6% compound interest because it will result in $86.76 more in interest earnings.
Aria should invest with 6% compound interest because it will result in $73.81 more in interest earnings.
To find the correct option, we need to compare the interest earnings for both options.
For the simple interest option:
Interest = Principal * Rate * Time
Interest = 6700 * 0.065 * 3
Interest = $1,301.50
For the compound interest option:
Interest = Principal * (1 + Rate)^Time - Principal
Interest = 6700 * (1 + 0.06)^3 - 6700
Interest = $1,313.70
Now, let's compare the two options:
Option 1: Simple Interest at 6.5%
Interest = $1,301.50
Option 2: Compound Interest at 6%
Interest = $1,313.70
The correct statement is:
Aria should invest with 6% compound interest because it will result in $12.20 more in interest earnings.
For the simple interest option:
Interest = Principal * Rate * Time
Interest = 6700 * 0.065 * 3
Interest = $1,301.50
For the compound interest option:
Interest = Principal * (1 + Rate)^Time - Principal
Interest = 6700 * (1 + 0.06)^3 - 6700
Interest = $1,313.70
Now, let's compare the two options:
Option 1: Simple Interest at 6.5%
Interest = $1,301.50
Option 2: Compound Interest at 6%
Interest = $1,313.70
The correct statement is:
Aria should invest with 6% compound interest because it will result in $12.20 more in interest earnings.
4 answers