Answer:
account after 2 years of simple interest at 10%: (2,500 * 0.10 * 2) + 2500 = 3,000
Note that simple interest only pays interest on the original balance, NOT on the accrued (paid) interest....
a) 5 more years at 10% simple: (2500 * 0.10 * 5) + 3,000 = $4,250
or
5 years compound interest on $3k: 3,000(1.07^5) = $4,207.66
b) TOTAL of 10 years
simple interest: (2500 * 0.10 * 10) + 2500 = 5,000
compound interest: only 8 years remain of the total 10 year time horizon
3000(1.07^8) = $5,154.56
Step-by-step explanation:
