Answer:
The difference is that the interest in Option 2 gets capitalized faster.
Explanation:
Giving the following information:
Option 1:
$9,250 in an account that pays 6 percent simple interest (annually).
Option 2:
$9,250 n an account that pays 6 percent semiannually.
Number of years= 7 years
We need to use the following formula:
FV= PV*(1+i)^n
Option 1:
FV= 9,250*(1.06^7)= $13,908.58
Option 2:
FV= 9,250*(1.03^14)= $13,991.45
n= 2*7= 14
i= 0.06/2= 0.03
The difference is that the interest in Option 2 gets capitalized faster.
Answer:
860.25
Explanation:
Solution
Simple interest= 9250+(9250*0.06*7)=13,135
Semi Annual Compound interest=A(1+r)^nt)/n
9250(1+0.06)^7*2)/2
=9250(1+0.03)^14
=9250(1.03)^14
=9250(1.513)=13,995.25
Take the difference between between simple and compound interest
13,995.25-13,135=860.25
