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.(1 point)
Responses
$47,810.80
$47,810.80
$1,350.72
$1,350.72
$231.57
$231.57
$198.72
To calculate the difference in financial gains when investing with simple interest and compound interest, we'll first calculate the amount gained with each type of interest.
For simple interest:
Interest = Principal * Rate * Time
Interest = $3,200 * 0.045 * 8
Interest = $1,152
Total amount with simple interest = Principal + Interest = $3,200 + $1,152 = $4,352
For compound interest:
Total amount with compound interest = Principal * (1 + Rate)^Time
Total amount with compound interest = $3,200 * (1 + 0.045)^8
Total amount with compound interest ≈ $4,584.36
Difference in financial gains = Total amount with compound interest - Total amount with simple interest
Difference in financial gains ≈ $4,584.36 - $4,352 ≈ $232.36
So the closest option is $231.57, which is the correct difference in financial gains.