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)
The higher resulting balance after investing $500 for a period of 10 years is $?
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To find the higher resulting balance after investing $500 for a period of 10 years, we will compare the simple interest and compound interest calculations.
For simple interest:
Principal (P) = $500
Rate (R) = 8% = 0.08
Time (T) = 10 years
Simple Interest formula: SI = P * R * T
SI = $500 * 0.08 * 10 = $400
So, the simple interest after 10 years is $400.
For compound interest:
Principal (P) = $500
Rate (R) = 9% = 0.09
Time (T) = 10 years
Compound Interest formula: CI = P * (1 + R)^T - P
CI = $500 * (1 + 0.09)^10 - $500
CI = $500 * (1.09)^10 - $500
CI ≈ $1220.79 - $500
CI ≈ $720.79
So, the compound interest after 10 years is approximately $720.79.
Comparing the two values, we can see that the compound interest of approximately $720.79 is higher than the simple interest of $400.
Therefore, the higher resulting balance after investing $500 for a period of 10 years is $720.79.