To find the interest earned by Account A, we can use the formula:
Interest = Principal x Rate x Time
Plugging in the given values, we get:
Interest = $1,500 x 0.04 x 3 = $180
So Account A earns $180 in interest over three years.
Similarly, we can find the interest earned by Account B using the same formula:
Interest = Principal x Rate x Time
Plugging in the given values, we get:
Interest = $1,500 x 0.06 x (21/12) = $157.50
So Account B earns $157.50 in interest over 21 months.
To compare the interest earned by the two accounts, we can see that Account A earns more interest than Account B, even though the interest rate is lower. This is because the time period is longer for Account A, giving the interest more time to accrue.
Example 1: Two principal amounts and two simple interest rates that would earn equal amounts of interest in one year are:
Principal 1 = $1,000
Rate 1 = 5%
Interest 1 = $50
Principal 2 = $2,000
Rate 2 = 2.5%
Interest 2 = $50
Example 2: Two principal amounts and two periods of time for which the simple interest earned at 2.59% would be equal are:
Principal 1 = $500
Time 1 = 4 years
Interest 1 = $51.80
Principal 2 = $1,000
Time 2 = 2 years
Interest 2 = $51.80