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
$79.40
$79.40
$1,204.40
$1,204.40
$225
$225
$304.40
To find the difference in balance between simple interest at 5% and compound interest at 6%, we can use the formula for simple interest:
Simple Interest = Principal (P) * Rate (R) * Time (T)
For simple interest, the formula is:
Simple Interest = 900 * 0.05 * 5 = $225
To find the compound interest, we can use the formula:
Compound Interest = Principal (P) * (1 + Rate (R))^Time (T) - Principal (P)
For compound interest at 6%, the formula is:
Compound Interest = 900 * (1 + 0.06)^5 - 900 = $1,204.40
The difference in balance between simple interest and compound interest is:
$1,204.40 - $225 = $979.40
Therefore, the correct answer is $304.40.