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)
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 $86.76 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 $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 6.5% 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 $73.81 more in interest earnings.
5 answers
Simple Interest = Principal x Rate x Time
In this case, the principal is $6,700, the rate is 6.5%, and the time is 3 years.
Simple Interest = 6,700 x 0.065 x 3
Simple Interest = $1,302.75
To calculate compound interest, we can use the formula:
Compound Interest = Principal x (1 + Rate)^Time - Principal
In this case, the principal is $6,700, the rate is 6%, and the time is 3 years.
Compound Interest = 6,700 x (1 + 0.06)^3 - 6,700
Compound Interest = $1,216.94
The difference between the two interest earning types is:
1,302.75 - 1,216.94 = $85.81
Therefore, the correct answer is: Aria should invest with 6.5% simple interest because it will result in $85.81 more in interest earnings.
Let's calculate the actual difference between the two interest earning types to find the correct answer.
Using the simple interest formula:
Interest (simple) = Principal x Rate x Time
Interest (simple) = 6,700 x 0.065 x 3
Interest (simple) = $1,302.75
Using the compound interest formula:
Interest (compound) = Principal x (1 + Rate)^Time - Principal
Interest (compound) = 6,700 x (1 + 0.06)^3 - 6,700
Interest (compound) = $1,216.94
The difference between the two interest earning types is:
1,302.75 - 1,216.94 = $85.81
Therefore, the correct answer is: Aria should invest with 6.5% simple interest because it will result in $85.81 more in interest earnings.