Question

Jack Palomo has deposited $2,500 today in an account paying 6 percent interest annually. What would be the simple interest earned on this investment in five years? If the account pays compound interest, what will be the interest on interest in five years?A) $750; $95.56 B) $150; $845.56 C) $150; $95.56 D) $95.56; $845.56

Answer 1

The simple interest earned on the investment in five years would be $750. If the account pays compound interest, the interest on interest in five years would be $95.56.

Step-by-step explanation:

The simple interest earned on the investment in five years would be $750. This can be calculated using the formula:

Simple Interest = Principal × Rate × Time

So, in this case, the simple interest would be $2,500 × 0.06 × 5 = $750.

If the account pays compound interest, the interest on interest in five years would be $95.56. Compound interest is calculated using the formula:

Compound Interest = P(1+r)^n - P

Where P is the principal amount, r is the interest rate, and n is the number of periods. In this case, if we assume the interest is compounded annually, the compound interest would be:

$2,500(1+0.06)^5 - $2,500 = $95.56.