For the given principal, interest rate, and time period, determine the amount of interest that would be earned in anaccount paying simple interest. Also determine the amount of interest that would be earned in an account payingcompound interest with interest compounded annually. Determine how much more interest would be earned in theaccount paying compound interest. Round to the nearest cent.
-Principal: $950 Rate: 3% Years: 6

Question

Quizplus · Accepted Answer

The simple interest is calculated as $ I = P \times r \times t = 950 \times 0.03 \times 6 = 171 $. The compound interest is calculated as $ A = P(1 + r)^t = 950(1 + 0.03)^6 = 1134.35 $, so the compound interest is $ 1134.35 - 950 = 184.35 $. The difference is $ 184.35 - 171 = 13.35 $.

For the Given Principal, Interest Rate, and Time Period, Determine