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 interest earnings for each option, we can use the formula:
Simple Interest = Principal * Rate * Time
Compound Interest = Principal * (1 + Rate/100) ^ Time - Principal
For simple interest at 6.5%:
Interest = 6700 * 6.5/100 * 3 = $1384.50
For compound interest at 6%:
Interest = 6700 * (1 + 6/100) ^ 3 - 6700 = $1297.24
The difference between the two interest earning types is:
1384.50 - 1297.24 = $87.26
Therefore, Aria should invest with 6.5% simple interest because it will result in $87.26 more in interest earnings.