Write an equation of the line below

jok3333 [9.3K]

Answer:

Part A: The value of the simple interest investment at the end of three years is $12,220

Part B: The value of the compounded quarterly interest investment at the end of three years is $12,134.08

Part C: The simple interest investment is better over the first three years

Part D: I advise George to invest his money in the compounded interest investment if he will keep the money for a long time

Step-by-step explanation:

Part A:

A = P + P r t, where

∵ George deposits $10,000

∴ P = 10,000

∵ First option offers 7.4% per year simple interest

∴ r = 7.4% = 7.4 ÷ 100 = 0.074

∵ He may not withdraw any of the money for three years after

the initial deposit

∴ t = 3

- Substitute all of these values in the formula above

∴ A = 10,000 + 10,000(0.074)(3)

∴ A = 10,000 + 2,220

∴ A = 12,220

The value of the simple interest investment at the end of three years is $12,220

Part B:

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

∵ George deposits $10,000

∴ P = 10,000

∵ The second option offers a 6.5% interest rate compounded quarterly

∴ r = 6.5% = 6.5 ÷ 100 = 0.065

∴ n = 4 ⇒ quarterly

∵ He may not withdraw any of the money for three years after

the initial deposit

∴ t = 3

- Substitute all of these values in the formula above

∴ $A=10,000(1+\frac{0.065}{4})^{(4)(3)}$

∴ $A=10,000(1.01625)^{12}$

∴ A = 12,134.08

The value of the compounded quarterly interest investment at the end of three years is $12,134.08

Part C:

∵ 12,220 > 12,134.08

∴ The simplest interest investment is better than the compounded

interest investment at the end of three years

The simple interest investment is better over the first three years

Part D:

I advise George to invest his money in the compounded interest investment if he will keep the money for a long time

Look to the attached graph below

The red line represents the simple interest investment
The blue curve represents the compounded interest investment
(Each 1 unit in the vertical axis represents $1000)
After 0 years and before 4.179 years the red line is over the blue curve, that means the simple interest is better because it gives more money than the compounded interest
After that the blue curve is over the red line that means the compounded quarterly is better because it gives more money than the simple interest