Question

You have $1000 to deposit for 3 years and two accounts options. The first earns you simple interest at a rate of 5% and the second earns you compound interest (compound annually) at the same rate. Which account earns you more money?

Answer 1

hey there!!!

here P = 1000 $

we have to deposit it for 3 years now consider in case of SI

we know that in case of simlpe interest principle remains same so

SI = P×R×T/100 = (1000×5×3)/100

= 150 $

now Amount = P + SI = 1000 + 150

= 1150 $

In case of CI then Amount of 1st interest becomes principle.

=> A = P( 1 + r/100)^n

= 1000(1 + 5/100)³

= 1000(1+ 1/20)³

= 1000(21/20)³

= 1000× (21×21×21)/(20×20×20)

= (21×21×21)/8

= 1157.625 $

Now we can compare both the Amount in case of Compound interest the amount is greater...

so the second Account will earns you more.

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⭐Hope it will help you

Answer 2

Answer:

obviously the account giving you compound interest......

PROCESS

for simple interest

1) for simple interest

total money after 3 years

$\frac{</u><u> </u><u>1000 \times 5 \times 3}{100} + 1000 \\ = </u><u> </u><u>1150$

2)for compound interest

$</u><u> </u><u>1000(1 + \frac{5}{100} ) {}^{3} \\ 1000 \times \frac{105}{100} \times \frac{105}{100} \times \frac{105}{100} \\ </u><u> </u><u>1157.625$

so can see total money in compound interest is greater than the simple intetestokk