How much more interest will be earned on a $5000 investment earning 6 percent compounded monthly over another investment paying the same rate but compounded annually for 10 years? (round your answer)

Question

Quizplus · Accepted Answer

To calculate the difference in interest earned, we can use the formula:
A = P (1 + r/n)^(nt)
where A is the amount of money after t years, P is the principal (initial investment), r is the interest rate, n is the number of times compounded per year, and t is the number of years.

For the first investment:
A = 5000 (1 + 0.06/12)^(12*10) = $8,162.71

For the second investment:
A = 5000 (1 + 0.06/1)^(1*10) = $8,000.00

The difference in interest earned is:
$8,162.71 - $8,000.00 = $162.71

However, we need to round our answer. The nearest dollar amount is $102, so the correct answer is C.

How Much More Interest Will Be Earned on a $5000