Question

You are given a choice of taking the simple interest on ​$10,000 invested for 2 years at a rate of 3​% or the interest on ​$100,000 invested for 2 years at an interest rate of 3​% compounded daily (use the Banker's rule ).

Which investment earns the greater amount of​ interest?
Give the difference between the amounts of interest earned by the two investments.

Answer 1

Compount interest earns more. Difference between 2 interest is $92 445.39

Explanation:

Simple Interest:

`I = (prt)/(100)`

p = $10000

r = 3%

t = 2years

I = (10000×3×2)/100

= $600

Total amount = $10 600

Compound Interest:

`A = p( {1 + (r)/(100)) }^(n)`

p = $100000

r = 3/730 (daily)

t = 730 (2yrs)

A = 100000[1+(3/73000)]^730

= $103 045.39 (2d.p)

Difference = $103045.39 -

$10600

= $92 445.39

(Correct me if i am wrong)