Question

How much interest do you earn when you deposit $100 at 25% for 2 years?

Answer 1

Year 1) 100+100(.25) = 125

Year 2) 125+125(.25) = 125+31.25 = $156.25

156.25 - 100 = $56.25

Explanation:

Answer 2

For simple interest: $50, for compound interest: $56.25

Explanation:

For simple interest: 25% *100 = $25

$25*2 = $50

For compound interest:

Year 1) 100+100(.25) = 125

Year 2) 125+125(.25) = 125+31.25 = $156.25

156.25 - 100 = $56.25