Question

You invest ​$2,500 in each of two accounts. Account A earns simple interest at a rate of ​2% over 4 years. Account B earns simple interest at a rate of ​6% over 18 months. Find the interest earned by each account. How does the interest earned by the two accounts​ compare? Use paper and pencil. Give an example of two principal amounts and two simple interest rates that would earn equal amounts of interest in one year. Give an example of two principal amounts and two periods of time for which the simple interest earned at ​2.42% would be equal

Answer 1

Answer: See explanation

Explanation:

You invest ​$2,500 in each of two accounts. Account A earns simple interest at a rate of ​2% over 4 years.

Interest = PRT / 100

= (2500 × 2 × 4) / 100

= 20000 / 100

= $200

Account B earns simple interest at a rate of ​6% over 18 months.

Interest = PRT / 100

= (2500 × 6 × 1.5) / 100

= 22500 / 100

= $225

Interest for account B is more than that of account A at a shorter period of time.

An example of two principal amounts and two simple interest rates that would earn equal amounts of interest in one year will be:

A: Principal = $2000

Interest rate = 3%

Simple interest = (2000 × 3 × 1)/100 = $60

B. Principal = $3000

Interest rate = 2%

Simple interest = (3000 × 2 × 1) / 100

= 6000 / 100

= $60