Question

If you invested $500 at 5% simple interest for 2 years, how much interest do you earn? Show work and answer in complete sentences to earn full credit.

If you invest $500 at 3% compounded monthly for 2 years, how much interest you do earn? Show work and answer in complete sentences to earn full credit.




Which would you rather do?

Answer 1

Therefore I earn $50 interest

Therefore I earn $30.88 interest.

I would do the first one.

Explanation:

A.

Given , I invested $500 at 5% simple interest for 2 years.

P=$500, r =5% and t = 2 years

`Interest (I) =(P * r * t)/(100)`

`=\$(500 * 5 * 2)/(100)`

=$50

Therefore I earn $50 interest.

B.

Given , I invested $500 at 3% compounded monthly for 2 years.

P=$500, r =3% = 0.03 and t = 2 years

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

`=\$500(1+(0.03)/(12))^( 2* 12)`

=$530.88

Interest = $(530.88-530) = $30.88

I would do the first one.