Ask Question
4 July, 14:52

What would be the difference at the end of one year between the simple interest earned on a deposit of $450 at 4.5% and the compound interest earned on $450 at 4.5% compounded annually?

$22.50

$22.25

$0

$20.25

+4
Answers (1)
  1. 4 July, 15:05
    0
    Answer: $0

    Step-by-step explanation:

    The formula for simple interest is expressed as

    I = PRT/100

    Where

    P represents the principal

    R represents interest rate

    T represents time in years

    I = interest after t years

    From the information given

    T = 1 year

    P = $450

    R = 4.5%

    Therefore

    I = (450 * 4.5 * 1) / 100

    I = 2025/100

    I = 20.25

    For compound interest,

    Initial amount deposited into the account is $450 This means that the principal,

    P = 450

    It was compounded annually. This means that it was compounded once in a year. So

    n = 1

    The rate at which the principal was compounded is 4.5%. So

    r = 4.5/100 = 0.045

    It was compounded for just a year. So

    t = 1

    The formula for compound interest is

    A = P (1+r/n) ^nt

    A = total amount in the account at the end of t years. Therefore

    A = 450 (1+0.045/1) ^1*1

    A = 450 (1.045) = $470.25

    Compound interest = 470.25 - 450 = 20.25

    The difference is 20.25 - 20.25 = 0
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “What would be the difference at the end of one year between the simple interest earned on a deposit of $450 at 4.5% and the compound ...” in 📗 Mathematics if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers