Question

If $1500 is deposited in an account that pays 4% interest, what is the difference in

Answer 1

Answer:

The Difference between Amount earned from Compound Interest and amount earned from Simple Interest is $7.2  

Step-by-step explanation:

Given as :

The Principal deposited in an account = $ 1500

The annual rate of interest = 4%

The time period = 3  years

From compounded method

Amount = principal × $(1+\frac{Rate}{100})^{Time}$

Or, Amount = $1500 × $(1+\frac{4}{100})^{3}$

Or, Amount = $1500 × ( 1.04 )³

∴   Amount = $1500 × 1.1248

I.e  Amount = $1687.2

From Simple Interest method

Simple interest = $\frac{principal\times rate\times time}{100}$

Or, Simple interest =  $\frac{1500\times 4\times 3}{100}$

Or, Simple interest =  $\frac{18000}{100}$

∴   Simple interest = $180

So, Amount = Interest + Principal

     Amount = $180 + $1500

I,e  Amount = $1680

Difference between Amount earned from CI and amount earned from SI = $1687.2 - $1680 = $7.2  

Hence The Difference between Amount earned from Compound Interest and amount earned from Simple Interest is $7.2    Answer