Question

Stacy is borrowing $5,000 at 4.25% interest for 5 years. She can choose simple interest or compound interest. Which one will allow her to owe the LEAST amount of money in interest over those 5 years?

Answer 1

$6062.50

Explanation:

Answer 2

Answer: simple interest rate will afford her the opportunity to owe the least in 5 years

Step-by-step explanation: if she chooses simple interest she will pay 4.25% of $5,000 =$5212.5 every year for 5 years

But compound interest will make her pay 4.25% of $5000 the first year

4.25% of $5212.5 the second year and it keeps increasing till the next 5 years