##### (interest) (algebra)

label Mathematics
account_circle Unassigned
schedule 1 Day
account_balance_wallet \$5

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%)

May 15th, 2015

Principal, P = \$1000

Time, t = 2 years

Rate of interest, r = 5.5% = 0.055

--------------------------------------------------

Simple Interest

$I=Prt\\ \\ I=1000*0.055*2\\ \\ I=\110$

------------------------------------------------------

Compound Interest

Assuming it is compounded annually.

So, n = 1

$A=P\bigg(1+\frac{r}{n}\bigg)^{nt}\\ \\ A=1000\bigg(1+\frac{0.055}{1}\bigg)^{1*2}\\ \\ A=1000\big(1.055\big)^{2}\\ \\ A=\1113.025$

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

-----------------------------------------------------------------------------------

So,

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

May 15th, 2015

...
May 15th, 2015
...
May 15th, 2015
Aug 22nd, 2017
check_circle