Answer:
Simple interest = $36
Compound interest = $48.96
It's better to invest $600 at 4% compounded monthly for 2 years as it's giving us more profit.
Step-by-step explanation:
Simple interest is calculated on the principal amount of a loan. Compound interest is calculated on the sum of principal amount and accumulated interest of previous periods.
Simple interest =
Compound interest =
Here, P denotes principal amount, R denotes rate of interest, T denotes time.
Given: $600 invested at 3% simple interest for 2 years, $600 invested at 4% compounded monthly for 2 years
To find: Simple interest and compound interest.
Solution:
Take P=600, R=3% and T=2 years
Using the formula of simple interest mentioned above,
Simple interest =
So, interest earned is $36
Take P=600, R=4% and T=2 years
Using the formula of compound interest mentioned above,
Compound interest =
=
=
=
=
So, interest earned is $48.96
It's better to invest $600 at 4% compounded monthly for 2 years as it's giving us more profit.