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.(1 point)
To find the balance after 10 years, we can use the formula for simple interest:
Balance = Principal * (1 + interest rate * time)
For simple interest, the interest rate is 8% or 0.08, and the principal is $500 for a period of 10 years:
Simple Interest Balance = $500 * (1 + 0.08 * 10)
Simple Interest Balance = $500 * (1 + 0.8)
Simple Interest Balance = $500 * 1.8
Simple Interest Balance = $900
For compound interest, the formula is:
Balance = Principal * (1 + interest rate)^time
Compound Interest Balance = $500 * (1 + 0.09)^10
Compound Interest Balance = $500 * (1.09)^10
Compound Interest Balance ≈ $500 * 2.367416
Compound Interest Balance ≈ $1183.71
The higher resulting balance is from compound interest, which is approximately $1183.71.