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)
• Aria should invest with 6.5% simple interest because it will result in $187.26 more in interest eamings.
• Aria should invest with 6% compound interest because it will result in $86.76 more in interest eamings.
• Aria should invest with 6% compound interest because it will result in $73.81 more in interest eamings.
• Aria should invest with 6.5% simple interest because it will result in $26.69 more in interest earnings.
To find the difference in interest earnings between simple interest at 6.5% and compound interest at 6%, we need to calculate the interest earned for each option.
For simple interest, the formula to find the interest earned is: interest = principal * rate * time.
So for Aria's investment of $6,700 for 3 years at 6.5% simple interest, the interest earned would be: interest = 6700 * 0.065 * 3 = $1,305.
For compound interest, the formula to find the interest earned is: interest = principal * (1 + rate)^time - principal.
So for Aria's investment of $6,700 for 3 years at 6% compound interest, the interest earned would be: interest = 6700 * (1 + 0.06)^3 - 6700 = $1,218.69.
Now we can find the difference between the two interest earnings: difference = simple interest - compound interest = 1305 - 1218.69 = $86.31.
Therefore, the correct answer is: Aria should invest with 6.5% simple interest because it will result in $86.31 more in interest earnings.