Question

Encik Zulhazim deposited RM8000 in a fixed deposit account at Bank T for 2 years with interest rate of 5% per annum. What is the difference between the amount of interests Encik Zulhazim earned if he was given compound interest (compounded once every 4 months) compared to simple interest? ​

Answer 1

Answer: $34.08

Step-by-step explanation:

$\text{Compound Interest}:A=P\bigg(1+\dfrac{r}{n}\bigg)^{nt}\\\\\bullet A=\text{accrued amount (final balance)}\\\bullet P=\text{principal (amount invested)}\\\bullet r=\text{interest rate (convert percentage to a decimal)}\\\bullet n=\text{number of times compounded (in one year)}\\\bullet t=\text{time (number of years)}\\\\\\\underline{\text{Given:}}\\\bullet P=8000\\\bullet r=5\% (0.05)\\\bullet n=3\ \text{(every 4 months is 3 times per year)}\\\bullet t=2$

$A=8000\bigg(1+\dfrac{0.05}{3}\bigg)^{3(2)}\\\\\\A = \large\boxed{8834.08}$

$\text{Simple Interest}:A=P(1+rt)\\\\A=8000+8000[1+0.05(2)]\\\\A=\large\boxed{8800.00}$

Difference = Compound Interest - Simple Interest

                 =  8834.08  - 8800.00

                 =       34.08