Question

Marisa and Miguel each invested $3000 for 8 years. Marisa invested her money at 4.5% simple interest and Miguel invested his money at 4.5% compounded annually. How much more interest will Miguel earn than Marisa?

Answer 1

Therefore Miguel will earn $186 more that Marisa

Explanation:

To solve for how much more interest Miguel earn than Marisa, we need to solve for their various investments individually and compare both results.

Given data

Principal p = $3,000

Final amount A = ?

Rate r= 4.5%

Time t = 8 years

Firstly applying the simple interest option for Marisa we have.

`A= P (1+rt)`

`A= 3000(1+0.045*8)\\A= 3000(1 + 0.36)\\A= 3000(1.36)\\A= $4,080`

Secondly let us solve the compounded interest for Miguel

`A= P(1+r)^(t) \\A= 3000(1+ 0.045)^(8) \\A= 3000(1.045)^8} \\A= 3000(1.422)\\A= 4,266\\`

Hence
`4266- 4080=186`

Therefore Miguel will earn $186 more that Marisa