Aria is investing 6700 of her savings from her summer job for her collage fund she is planning to invest the amount for 3 years and can choose between simple interest at 6.5 %
per year or compound interest at 4% per year.
To calculate the simple interest, we can use the formula:
Simple Interest = (Principal) x (Rate) x (Time)
Simple Interest = 6700 x 0.065 x 3
Simple Interest = 1309.50
Aria would earn $1309.50 in simple interest over 3 years.
To calculate the compound interest, we can use the formula:
Compound Interest = Principal x (1 + Rate/100)^Time - Principal
Compound Interest = 6700 x (1 + 0.04)^3 - 6700
Compound Interest = 6700 x 1.04^3 - 6700
Compound Interest = 6700 x 1.125 - 6700
Compound Interest = 7512.50 - 6700
Compound Interest = 812.50
Aria would earn $812.50 in compound interest over 3 years.
Comparing the two options, Aria would earn more money by choosing the simple interest option, earning $1309.50 in interest compared to $812.50 with compound interest.