Respuesta :
Answer:
Simple interest = $36
Compound interest = $48.96
It's better to invest $600 at 4% compounded monthly for 2 years as it's giving us more profit.
Step-by-step explanation:
Simple interest is calculated on the principal amount of a loan. Compound interest is calculated on the sum of principal amount and accumulated interest of previous periods.
Simple interest = [tex]\frac{P R T}{100}[/tex]
Compound interest = [tex]P(1+\frac{R}{100} )^T-P[/tex]
Here, P denotes principal amount, R denotes rate of interest, T denotes time.
Given: $600 invested at 3% simple interest for 2 years, $600 invested at 4% compounded monthly for 2 years
To find: Simple interest and compound interest.
Solution:
Take P=600, R=3% and T=2 years
Using the formula of simple interest mentioned above,
Simple interest = [tex]\frac{600\times 3\times 2}{100}=36[/tex]
So, interest earned is $36
Take P=600, R=4% and T=2 years
Using the formula of compound interest mentioned above,
Compound interest = [tex]600\left ( 1+\frac{4}{100} \right )^2-600[/tex]
=[tex]600\left ( 1+\frac{1}{25} \right )^2-600[/tex]
=[tex]600\left [ \left ( \frac{26}{25} \right )^2-1 \right ][/tex]
=[tex]600\left ( \frac{676}{625}-1 \right )[/tex]
=[tex]600\times \frac{51}{625}=48.96[/tex]
So, interest earned is $48.96
It's better to invest $600 at 4% compounded monthly for 2 years as it's giving us more profit.
