Question

Tyson and Ariana each invested $2,500 in separate accounts. Tyson’s interest rate is 5.75% and is compounded annually. Ariana’s simple interest rate is 5.75%. Neither will make any additional deposits or withdrawals. At the end of 6 years, how much more has Tyson earned? Round your answer to the nearest cent.

Answer 1

$133.75

Explanation:

Step one:

for Tyson

P=$2500

rate= 5.75%= 0.0575

time t= 6years

The compound interest formula is

A=P(1+r)^t

A=2500(1+0.0575)^6

A=2500(1.0575)^6

A=2500*1.3985

A=3496.25

Tyoson Earned $3496.25

Step two:

for Ariana

P=$2500

rate= 5.75%= 0.0575

time t= 6years

the simple interest formula is

A=P(1+rt)

A=2500(1+0.0575*6)

A=2500(1+0.345)

A=2500(1.0345)

A=3362.5

Ariana earned $3362.5

The difference in their earnings is

=3496.25-3362.5

=$133.75