You are given a choice of taking the simple interest on $100,000 invested for 4 years at a rate of 2 % or the interest on $100,000 invested for 4 years at an interest rate of 2 % compounded quarterly. Which investment earns the greater amount of interest? Give the difference between the amounts of interest earned by the two investments.

Question

Mohammad Bond

Mathematics

7 April, 21:28

You are given a choice of taking the simple interest on $100,000 invested for 4 years at a rate of 2 % or the interest on $100,000 invested for 4 years at an interest rate of 2 % compounded quarterly. Which investment earns the greater amount of interest? Give the difference between the amounts of interest earned by the two investments.

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Answers (1)

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Elisa Finley · Answer 1

Answer: The second type of investment earns greater amount of interest.

Step-by-step explanation:

1)

SI = prt / 100

= 10000 x. 02 x 4

= 8000

2)

At compound intetest

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

= 108307.12

Interest = 108307.12 - 100000 = 8307.12

Difference

8307.12 - 8000 = 307.12