Find the best balance after investing $12,000 for a period of 7
years at two different interest earning types: simple interest at 5%
and compound interest at 4.5%. Round the answer to two decimal
places.
wrong
Apologies for the mistake. Let me recalculate the correct balances using the formulas.
For simple interest:
Principal = $12,000
Rate = 5% = 0.05
Time = 7 years
Balance = 12,000 * (1 + 0.05 * 7)
Balance = 12,000 * (1 + 0.35)
Balance = 12,000 * 1.35
Balance = $16,200
For compound interest:
Principal = $12,000
Rate = 4.5% = 0.045
Time = 7 years
Balance = 12,000 * (1 + 0.045)^7
Balance = 12,000 * (1.045)^7
Balance = 12,000 * 1.34515216163
Balance = $16,141.82
Therefore, the best balance is $16,141.82 when investing $12,000 for 7 years at a compound interest rate of 4.5%.
To find the best balance after 7 years, we can calculate the balance using simple interest and compound interest separately.
Simple interest formula:
Balance = Principal * (1 + (rate * time))
Compound interest formula:
Balance = Principal * (1 + rate)^time
For simple interest:
Principal = $12,000
Rate = 5% = 0.05
Time = 7 years
Balance = 12,000 * (1 + (0.05 * 7))
Balance = 12,000 * (1 + 0.35)
Balance = 12,000 * 1.35
Balance = $16,200
For compound interest:
Principal = $12,000
Rate = 4.5% = 0.045
Time = 7 years
Balance = 12,000 * (1 + 0.045)^7
Balance = 12,000 * (1.045)^7
Balance = 12,000 * 1.33411808576
Balance = $16,009.42
Therefore, the best balance is $16,200 when investing $12,000 for 7 years at a simple interest rate of 5%.