12) how much more interest is earned if $8,500 is invested into an account paying compound interest of 4%…

12) how much more interest is earned if $8,500 is invested into an account paying compound interest of 4% for 6 years compared to investing the $8,500 into an account paying simple interest of 4.5% for 5 years?

12) how much more interest is earned if $8,500 is invested into an account paying compound interest of 4% for 6 years compared to investing the $8,500 into an account paying simple interest of 4.5% for 5 years?

Answer

Explanation:

Step1: Calculate compound - interest amount

The compound - interest formula is $A = P(1 + r)^t$, where $P=$8500$, $r = 0.04$, and $t = 6$. $A_{1}=8500\times(1 + 0.04)^{6}=8500\times1.04^{6}\approx8500\times1.265319018496\approx10755.21$ The compound interest $I_{1}=A_{1}-P=10755.21 - 8500=$2255.21$

Step2: Calculate simple - interest amount

The simple - interest formula is $I = Prt$, where $P = 8500$, $r=0.045$, and $t = 5$. $I_{2}=8500\times0.045\times5=8500\times0.225=$1912.5$

Step3: Find the difference in interest

$I = I_{1}-I_{2}=2255.21-1912.5=$342.71$

Answer:

$342.71$