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prohojiy [21]
3 years ago
6

Investigate the difference between compounding annually and simple interest

Mathematics
1 answer:
Gennadij [26K]3 years ago
6 0

Step-by-step explanation:

Simple interest formula

A = P (1 + rt)

Compound interest formula

A = P(1 + \frac{r}{n})^{nt}

a.

A = 5000 (1 + 0.025*1)\\A=5000(1.025)\\A=5125

Simple interest is $125

b

. A = 5000 (1 + \frac{0.025}{1})^{1*1}      \\A=5000(1.025)\\A= 5125

Compound interest is $125

c. the result for both a and b are the same

d.

A = 5000 (1 + 0.025*3) \\A=5000(1.075) \\A=5375

the simple interest is $375

e

. A = 5000 (1 + \frac{0.025}{1})^{1*3}] \\A=5000(1.025)^3 \\A=5000(1.077)\\A= 5385

the compound interest is $385

f. the result compared, compound interest is $10 more than simple interest

g.

A = 5000 (1 + 0.02*6) \\A=5000(1.12) \\A=5600

the simple interest is $600

h.

A = 5000 (1 + \frac{0.02}{1})^{1*6}] \\A=5000(1.12)^6 \\A=5000(1.9738) \\A= 9869

the compound interest is $4869

i. the result from g and h, h is over 8 times bigger than g.

j. interest compound annually is not the same as simple interest, only for the case of a and b seeing that it is for 1 year. but for 2years and above there is difference as seen in c to h

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