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
