Question

Jaden has $6,000.00 to invest for 2 years. The table shows information about two investments Jaden can make. Investments Investment Rate Type of Interest X 4.5% Y 4% Simple Compound Jaden makes no additional deposits or withdrawals. Which investment earns the greater amount of interest over a period of 2 years? What amount of interest?​

Answer 1

For Investment X, the interest rate is 4.5%, which is a compound interest. For Investment Y, the interest rate is 4%, which is a simple interest.

To calculate the amount of interest Jaden will earn over two years, we will use the following formulas:

For Investment X: A = P(1 + r/n)^(nt), where A is the total amount, P is the principal amount, r is the annual interest rate, n is the number of times the interest is compounded per year, and t is the time in years.

For Investment Y: I = P*r*t, where I is the interest earned, P is the principal amount, r is the annual interest rate, and t is the time in years.

Using these formulas, we can calculate the amount of interest earned for each investment:

For Investment X: A = 6000(1 + 0.045/12)^(12*2) = $6,566.34 (rounded to the nearest cent)

Interest earned = $6,566.34 - $6,000 = $566.34

For Investment Y: I = 6000 * 0.04 * 2 = $480

Therefore, Investment X earns the greater amount of interest over a period of 2 years, which is $566.34.