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25 September, 11:57

Travis invested $9,250 in an account that pays 6 percent simple interest. How much more could he have earned over a 7-year period if the interest had compounded annually

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  1. 25 September, 11:59
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    Answer: $773.58

    Explanation:

    From the question, we are told that Travis invested $9,250 in an account that pays 6 percent simple interest over a 7 year period.

    We need to calculate the simple interest first. This will be:

    = PRT/100

    where

    P = principal = $9250

    R = rate = 6%

    T = time = 7 years

    Simple interest = (9250 * 6 * 7) / 100

    = $388500/100

    = $3885

    Amount after 7 years will now be:

    = $9250 + $3885

    = $13135

    If the interest was compounded annually, this will be:

    FV = PV (1 + r) ^n

    = $9,250 (1 + 0.06) ^7

    = $13,908.58

    Therefore, the difference will be:

    = $13,908.58 - $13,135

    = $773.58
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