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 need to calculate the interest earnings for each option and then compare them.
For the simple interest option at 6.5%:
Interest = Principal * Rate * Time
Interest = $6,700 * 0.065 * 3 = $1,298.50
For the compound interest option at 6%:
Future Value = Principal * (1 + Rate)^Time
Future Value = $6,700 * (1 + 0.06)^3 = $7,493.44
Interest = Future Value - Principal
Interest = $7,493.44 - $6,700 = $793.44
The difference in interest earnings between the two options is:
$793.44 - $1,298.50 = -$505.06
Therefore, Aria should invest with 6.5% simple interest because it will result in $505.06 less in interest earnings compared to the compound interest option.
no from the answers choses
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.
Apologies for the mistake. Let's recalculate the interest earnings for each option.
For the simple interest option at 6.5%:
Interest = Principal * Rate * Time
Interest = $6,700 * 0.065 * 3 = $1,298.50
For the compound interest option at 6%:
Future Value = Principal * (1 + Rate)^Time
Future Value = $6,700 * (1 + 0.06)^3 = $7,493.44
Interest = Future Value - Principal
Interest = $7,493.44 - $6,700 = $793.44
The difference in interest earnings between the two options is:
$793.44 - $1,298.50 = -$505.06
Therefore, the correct answer is:
Aria should invest with 6.5% simple interest because it will result in $505.06 less in interest earnings compared to the compound interest option.