Answer:
John
Explanation:
Neil will have the following amount after ten years.
Simple interest is calculated using the formula,
I= p x r x t
where I= interest, P= principal amount, r = interest rate, t is time
for Neil interest will be= $15,000 x 3/100 x 10
=$15,000 x 0.03 x 10
=$4500
Neil will have principal + interest amount
=$4,500 + $15,000
=$19,500
John invested in a compound interest account.
The amount after ten years will be
The formula for compound interest is
FV = PV × (1+r)^n
where FV = Future Value
PV = Present Value
r = annual interest rate
n = number of periods
After ten years, John will have
Fv= $15,000 x (1 + 3/100)^10
Fv= $15,000 x (1.03)^10
FV =$15,000 x 1.34391
Fv = $15,158.75
John will be able to clear his mortgage.
John will be able to repay the amount from this investment easier than Neil.
Because Neil has invested in simple interest, his amount at the end of 10 years will be equal to the interest earned and the principal amount.
According to the problem:
P (principal) = $15,000, I = 3%=0.03 and t =10 years
Therefore, I = P x r x t = 15,000 x 0.03 x 10 = $4,500
The amount at the end of 10 years
= principal + interest
= 15,000 + 4,500
= $19,500
On the other hand, John has invested his $15,000 in 3 percent compound interest compounded annually for 10 years.
According to the problem: P
= $15,000
I
= 3% = 0.03
n
= 10
Therefore, according to the formula
M = P( 1 + i )n where M is the final amount at the end of the term, we have
M = 15,000(1+0.03)10
= 20,158.75 (approximately).
= $20,158.75
Therefore, John will be able to repay the debt from this investment easily, because Neil is $500 short of the required amount.
