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The value of $1,000 after earning simple interest
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19 Dec 2022, 06:15
19 Dec 2022, 06:15
Expert Reply
00:00
Question Stats:
80% (01:33) correct
20% (01:32) wrong based on 25 sessions
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Quantity A |
Quantity B |
The value of $1,000 after earning simple interest at 20% for 5 years |
The value of $1,000 after earning compound interest at 2 0 % for 4 years, compounded annually |
A) Quantity A is greater.
B) Quantity B is greater.
C) The two quantities are equal.
D) The relationship cannot be determined from the information given.
Re: The value of $1,000 after earning simple interest
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29 Dec 2022, 10:55
29 Dec 2022, 10:55
1
SIMPLE INTEREST= 20% of 1000=200
200*5(years)=1000
now add 1000+1000=2000
COMPOUNDED= 20% of 1000=200
1000*1.20^4=2073
QB
200*5(years)=1000
now add 1000+1000=2000
COMPOUNDED= 20% of 1000=200
1000*1.20^4=2073
QB
The value of $1,000 after earning simple interest
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09 Jan 2024, 23:05
09 Jan 2024, 23:05
1
\(SI = P \times R \times T =\) \(1000 \times 0.2 \times 5 = 1000\)
\(CI = P[1+\frac{r}{n}]^{nt} = P[1+\frac{0.2}{1}]^{4(1)} = 1000[1.2]^4 = 2073.6\)
where
r = rate expressed in decimals
n = number of times compounded per year
t = number of years
Clearly Quantity B is greater
\(CI = P[1+\frac{r}{n}]^{nt} = P[1+\frac{0.2}{1}]^{4(1)} = 1000[1.2]^4 = 2073.6\)
where
r = rate expressed in decimals
n = number of times compounded per year
t = number of years
Clearly Quantity B is greater
