Question

$987.65 is invested at 0.4% annual interest for 5 years.

a. Simple Interest b. Compound Interest

Answer 1

I. Simple interest = $19.753

II. Compound interest = $1007.6

Explanation:

Given the following data;

Principal = $987.65

Interest rate, R = 0.4%

Time, T = 5 years

To find the simple interest;

S.I = PRT/100

S.I = (987.65*0.4*5)/100

S.I = 1975.3/100

S.I = $19.753

II. To find the compound interest;

`A = P(1 + (r)/(100))^(t)`

Substituting into the formula, we have;

`A = 987.65(1 + (0.4)/(100))^(5)`

`A = 987.65(1 + 0.004)^(5)`

`A = 987.65(1.004)^(5)`

`A = 987.65(1.0202)`

A = $1007.6