Find the difference in financial gains when $3,200 is invested for 8 years with an interest rate of 4.5% for both simple interest and compound interest, and interest is compounded annually.
a. $1,350.72
b. $198.72
c. $231.57
d. $47,810.80
The formula for simple interest is I = P * r * t, where I is the interest, P is the principal amount, r is the interest rate, and t is the time in years.
Plugging in the values, we get I = 3200 * 0.045 * 8 = $1152.
The formula for compound interest is A = P * (1 + r/n)^(n*t), where A is the final amount, P is the principal amount, r is the interest rate, n is the number of compounding periods per year, and t is the time in years.
Plugging in the values, we get A = 3200 * (1 + 0.045/1)^(1*8) = $4546.34.
The difference in financial gains is $4546.34 - $1152 = $3394.34.
Therefore, the correct answer is not listed.