Question

A bank offers two different types of interest on saving accounts

Answer 1

Answer:

What is the answer

Step-by-step explanation:

Answer 2

Answer:

(a) The closet to the simple interest eaened in 5 years is $275.00.

(b) The closet to the compound interest earned in 5 years is $276.28.

Step-by-step explanation:

These can be determine as follows:

(a) Simple Interest

The interest earned and be determined using the simple interest formula as follows:

Simple interest = P * R * T ....................... (1)

Where;

P = Principal = $1,000

R = interest rate = 5.5%

T = term = 5

Substituting the values into equation (1), we have:

Simple interest = $1,000 * 5.5% * 5 = $275.00

(b) Compound Interest

The interest earned and be determined using the compound interest formula as follows:

Compound interest = P(1 + R)^T - P ....................... (2)

Where;

P = Principal = $1,000

R = interest rate = 5%, or 0.05

T = term = 5

Substituting the values into equation (2), we have:

Compound interest = $1,000(1 + 0.05)^5 - $1,000 = ($1,000 * 1.05^5) - $1,000 = ($1,000 * 1.2762815625) - $1,000 =$1,276.28 - $1,000 = $276.28