Question

Assume that you and your best friend each have $1,000 to invest. You invest your money in a fund that pays 10% per year compound interest. Your friend invests her money at a bank that pays 10% per year simple interest. At the end of 1 year, the difference in the total amount for each of you is: a. You have $10 more than she does. b. You have $100 more than she does. c. You both have the same amount of money. d. She has $10 more than you do.

Answer 1

Answer:

correct answer is c. You both have the same amount of money

Explanation:

given data

invest = $1000

pay compound interest = 10%

pay simple interest = 10%

time = 1 year

solution

we get here difference in the total amount that is your friend money -  your money  .................1

so difference in the total amount = invest × $(1+rate)^{time}$ - [ invest + ( invest  × rate × time) ] ......................2

put here value

difference in the total amount = $1000 × $(1+0.10)^{1}$ - [$1000 +  ( 1000  × 10% × 1) ]

difference in the total amount = 0

so correct answer is c. You both have the same amount of money