Answer: The simple interest earned when you invest $1,000 for 3 years at 10 % is $300.
The interest compounded when you invest for 2 years at 5 % is $102.5.
Explanation:
(i) Formula for simple interest : [tex]I=Prt[/tex], where P= Principal amount , r= rate of interest (in decimal) and t = time.
(ii) Formula for compound interest : [tex]CI=P[(1+r)^t-1][/tex], where P= Principal amount , r= rate of interest (in decimal) and t = time.
Given , P= $1,000 for t=3 years at r= 10 percent = 0.10 ( in decimal)
Then , Simple interest will be :
[tex]I=1000\times0.10\times3=\$300[/tex] [By using (i)]
Thus, The simple interest earned when you invest $1,000 for 3 years at 10 % is $300.
Also, Given , P= $1,000 for t=2 years at r= 5 percent = 0.05 ( in decimal)
Compound interest will be :
[tex]CI.=1000[(1+0.05)^2-1]=1000[(1.05)^2-1]\\\\=1000[1.1025-1]\\\\=1000[0.1025]=102.5[/tex] [By using (ii)]
Hence, interest compounded when you invest for 2 years at 5 % is $102.5.
Answer:
The simple interest earned when you invest $1,000 for 3 years at 10 % is $ 300 . The interest compounded when you invest the same sum for 2 years at 5 % is $ 331 .
Explanation:
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