Question

$1234 is invested at 5.6% annual interest for 7 years.
a. Simple Interest b. Compound Interest

Answer 1

A) $1,717.73.

B) $1,807.02.

Explanation:

Given that $ 1234 is invested at 5.6% annual interest for 7 years, to determine the final amount applying a simple interest and a compound interest, the following calculations must be performed:

A)

1234 + ((1234 x 0.056) x 7) = X

1234 + (69.104 x 7) = X

1234 + 483.728 = X

1717.728 = X

Therefore, applying a simple interest of 5.6% per year, in 7 years the amount invested would be $ 1,717.73.

B)

1234 x (1 + 0.056) ^ 7 = X

1234 x 1.056 ^ 7 = X

1234 x 1.464 = X

1,807.02 = X

Therefore, applying compound interest, the sum would become $ 1,807.02.