Aria is investing $6,700 of her savings from her summer job for her college fund. She is planning to invest the amount for 3 years and can choose between simple interest at 6.5% and compound interest at 6%. Find the difference between the two interest earning types to help Aria decide which investing option is best for her.(1 point)
Responses
Aria should invest with 6% compound interest because it will result in $86.76 more in interest earnings.
Aria should invest with 6.5% simple interest because it will result in $187.26 more in interest earnings.
Aria should invest with 6.5% simple interest because it will result in $26.69 more in interest earnings.
Aria should invest with 6% compound interest because it will result in $73.81 more in interest earnings.
To find the difference between the two interest earning types, we can use the formulas for simple interest and compound interest:
Simple interest: I = P * r * t
Compound interest: A = P * (1 + r/n)^(n*t)
In this case, Aria is investing $6,700 for 3 years.
For simple interest at 6.5%:
I = 6700 * 0.065 * 3 = $1,301.50
For compound interest at 6%:
A = 6700 * (1 + 0.06/1)^(1*3) = $7,573.60
The difference in interest earnings is:
D = A - P = 7573.60 - 6700 = $873.60
Therefore, the correct answer is:
Aria should invest with 6% compound interest because it will result in $873.60 more in interest earnings.