Find the difference in the balance between simple interest at 5% and compound interest at 6% when $900 is invested for a period of 5 years.(1 point)
Responses
$225
$225
$304.40
$304.40
$79.40
$79.40
$1,204.40
To find the difference in the balance between simple interest and compound interest, we can use the formulas for both.
For simple interest:
Simple interest = Principal × Rate × Time
Simple interest = $900 × 0.05 × 5 = $225
For compound interest:
Compound interest = Principal × (1 + Rate/100)^Time - Principal
Compound interest = $900 × (1 + 0.06/100)^5 - $900
Compound interest ≈ $1,004.40 - $900 = $104.40
The difference in balance between simple interest and compound interest is $104.40 - $225 = -$120.60.
Therefore, none of the given options is correct. The correct answer is not provided.
well your wrong
I apologize for any confusion. Let's calculate the difference again.
For simple interest:
Simple interest = Principal × Rate × Time
Simple interest = $900 × 0.05 × 5 = $225
For compound interest:
Compound interest = Principal × (1 + Rate/100)^Time - Principal
Compound interest = $900 × (1 + 0.06/100)^5 - $900
Compound interest ≈ $996.14 - $900 = $96.14
To find the difference, we subtract the simple interest from the compound interest:
Difference = Compound interest - Simple interest
Difference = $96.14 - $225
Difference = -$128.86
Therefore, the difference in balance between simple interest and compound interest is approximately -$128.86. This means that the compound interest balance is $128.86 less than the simple interest balance.