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 6.5% simple interest because it will result in $26.69 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.
Aria should invest with 6% compound interest because it will result in $73.81 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 $187.26 more in interest earnings.
Aria should invest with 6% compound interest because it will result in $86.76 more in interest earnings.
To find the difference between the two interest earning types, we need to calculate the interest earnings for each option.
For simple interest at 6.5%, we can use the formula: interest = principal * rate * time
So the interest earnings for simple interest would be: 6700 * 0.065 * 3 = $1303.50
For compound interest at 6%, we can use the formula: interest = principal * (1 + rate)^time - principal
So the interest earnings for compound interest would be: 6700 * (1 + 0.06)^3 - 6700 = $1377.81
The difference between the two interest earning types is: $1377.81 - $1303.50 = $74.31
Therefore, Aria should invest with 6% compound interest because it will result in $74.31 more in interest earnings.