To find the difference between the two interest earning types, we need to calculate the interest earnings for each option and then compare them.
For the simple interest option at 6.5%:
Interest = Principal * Rate * Time
Interest = $6,700 * 0.065 * 3 = $1,298.50
For the compound interest option at 6%:
Future Value = Principal * (1 + Rate)^Time
Future Value = $6,700 * (1 + 0.06)^3 = $7,493.44
Interest = Future Value - Principal
Interest = $7,493.44 - $6,700 = $793.44
The difference in interest earnings between the two options is:
$793.44 - $1,298.50 = -$505.06
Therefore, Aria should invest with 6.5% simple interest because it will result in $505.06 less in interest earnings compared to the compound interest option.
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)
Responses
Aria should invest with 6% compound interest because it will result in $86.76 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 6.5% simple interest because it will result in $26.69 more in interest earnings.
Aria should invest with 6% compound interest because it will result in $73.81 more in interest earnings.
3 answers
no from the answers choses
Aria should invest with 6% compound interest because it will result in $86.76 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 6.5% simple interest because it will result in $26.69 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% compound interest because it will result in $86.76 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 6.5% simple interest because it will result in $26.69 more in interest earnings.
Aria should invest with 6% compound interest because it will result in $73.81 more in interest earnings.
Apologies for the mistake. Let's recalculate the interest earnings for each option.
For the simple interest option at 6.5%:
Interest = Principal * Rate * Time
Interest = $6,700 * 0.065 * 3 = $1,298.50
For the compound interest option at 6%:
Future Value = Principal * (1 + Rate)^Time
Future Value = $6,700 * (1 + 0.06)^3 = $7,493.44
Interest = Future Value - Principal
Interest = $7,493.44 - $6,700 = $793.44
The difference in interest earnings between the two options is:
$793.44 - $1,298.50 = -$505.06
Therefore, the correct answer is:
Aria should invest with 6.5% simple interest because it will result in $505.06 less in interest earnings compared to the compound interest option.
For the simple interest option at 6.5%:
Interest = Principal * Rate * Time
Interest = $6,700 * 0.065 * 3 = $1,298.50
For the compound interest option at 6%:
Future Value = Principal * (1 + Rate)^Time
Future Value = $6,700 * (1 + 0.06)^3 = $7,493.44
Interest = Future Value - Principal
Interest = $7,493.44 - $6,700 = $793.44
The difference in interest earnings between the two options is:
$793.44 - $1,298.50 = -$505.06
Therefore, the correct answer is:
Aria should invest with 6.5% simple interest because it will result in $505.06 less in interest earnings compared to the compound interest option.