Between simple interest at 8% and compound interest at 9%,
find the higher resulting balance after investing $500 for a
period of 10 years. Round the answer to two decimal places.
To compare the resulting balances, we need to calculate the amount after 10 years for both simple interest and compound interest.
For simple interest, the formula is:
Amount = Principal * (1 + (Rate * Time))
For compound interest, the formula is:
Amount = Principal * (1 + Rate)^Time
Using these formulas, let's calculate the resulting balances:
For simple interest:
Principal = $500
Rate = 8% = 0.08
Time = 10 years
Amount = 500 * (1 + (0.08 * 10))
Amount = 500 * (1 + 0.8)
Amount = 500 * 1.8
Amount = $900
For compound interest:
Principal = $500
Rate = 9% = 0.09
Time = 10 years
Amount = 500 * (1 + 0.09)^10
Amount = 500 * (1.09)^10
Amount ≈ $1,316.97
Therefore, the higher resulting balance after investing $500 for a period of 10 years is approximately $1,316.97 (compound interest).