Find the difference between the simple interest and the compound interest that would be earned from $1000 invested for 2years at 5 1/2% (5.5%)

Principal, P = $1000

Time, t = 2 years

Rate of interest, r = 5.5% = 0.055

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Simple Interest

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Compound Interest

Assuming it is compounded annually.

So, n = 1

So, compound interest = A - P = 1113.025 - 1000 = $113.025

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So,

Compound interest - Simple interest = 113.025 - 110 = $3.025

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