Question

Please help me with this exercise

Answer 1

Explanation:

First year:

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

P - principal

r - interest per year (rate)

n - compound (annually)

t - times (in years)

A = 40,000
`(1+(0.06)/(1) )^((1)(1))` = 40,000( 1 + 0.06 ) = 42,400

`I_(Rachel)` = $2,400.00

Simple interest I = Prt

I = 40,000(0.06)(1) = 2,400

`I_(Michael)` = $2,400.00

Second year:

A = 40,000
`(1+(0.06)/(1) )^((1)(2))`

A = 44,944.00

I = $4944.00 - $2400.00 = $2,544.00

`I_(Rachel)` = $2,544.00

The simple interest is accumulated on a principal $40,000.00

`I_(Michael)` = $2,400.00

Third year:

A = 40,000
`(1+(0.06)/(1) )^((1)(3))`

`I_(Rachel)` = $7640.64 - $4944.00 = $2,696.64

`I_(Michael)` = $2,400.00