Question

Find the difference between simple intrest and compound interest on a deposit of $3,000 that earns 4.5% interest for 5 years Round to the nearest cent!

Answer 1

Simple Interest = PRT/100

P = $3000

R=4.5

T=5

substitute into the formula

`\text{Simple Interest =}(3000*4.5*5)/(100)`
`=675`

Simple interest = $675

Compound interest

`A=P(1+(r)/(n))^(nt)`

P=3000

r = 0.045

n=1

t=5

`A=3000(1+(0.045)/(1))^(1*5)`
`=3000(1.045)^5`
`=3738.55`

A = P + I

3738.55 = 3000 + I

I = 738.5458

compound interest= $738.5458

But we were asked to find the difference between simple interest and compound interest

$735.5458 - $675 = $60.5458 ≈ $60.55