Question

3. Alex wants to invest $6500 in an account that earns simple interest. The bank

has given him two options. The first option is a 7.7% interest rate, and the second
option is a 8.4% interest rate. How much more interest will be earned if Alex
chooses the second option?

Answer 1

Alex will earn $45.50 more in interest if he chooses the second option with an 8.4% interest rate.

Explanation:

Option 1:

Interest earned = Principal x Rate x Time

Interest earned = $6500 x 0.077 x 1 (assuming 1 year)

Interest earned = $500.50

Option 2:

Interest earned = Principal x Rate x Time

Interest earned = $6500 x 0.084 x 1 (assuming 1 year)

Interest earned = $546.00

The difference between the interest earned on the two options is:

$546.00 - $500.50 = $45.50

Therefore, Alex will earn $45.50 more in interest if he chooses the second option with an 8.4% interest rate.