Question

Question 1

Answer 1

Answer:

i) $500 at 5% simple interest for two years. Interest = 550 - 500 = $50

ii) $500 at 3% compounded monthly for 2 years.

    Interest = 530.88 - 500 = $30.88

Step-by-step explanation:

i) $500 at 5% simple interest for two years.

   Initial amount, P = $ 500

   Rate of interest, r = 0.05

   Time in years, t = 2

  Therefore Final amount A = P(1 + rt) = 500(1 + (0.05 $\times$ 2) ) = $550

   Therefore Interest = 550 - 500 = $50

ii) $500 at 3% compounded monthly for 2 years

    Initial or Principal Amount, P  = $500

    Rate of interest, r =0.03

    number of conversions, m = 12

     Time in years, t = 3

  Therefore final amount,  $A = P(1 + \frac{r}{m}) ^{mt} = 500( 1 + \frac{0.03}{12} )^{(12\times2)} = 500( 1 + \frac{0.03}{12} )^{24}$ = $530.88

Therefore Interest = 530.88 - 500 = $30.88