You are given a choice of taking the simple interest on $100,000 invested for 5 years at a rate of 2

Discussion in 'Calculator Requests' started by math_celebrity, Nov 12, 2017.

  1. math_celebrity

    math_celebrity Administrator Staff Member

    You are given a choice of taking the simple interest on $100,000 invested for 5 years at a rate of 2% or the interest on $100,000 invested for 5 years at an interest rate of 2% compounded daily. Which investment earns the greater amount of interest? Give the difference between the amounts of interest earned by the two investments

    Simple interest balance after 5 years at 2% is $110,000.

    Daily compounded interest for 5 years at 2% is 365 days per year * 5 years = 1,825 days = $110,516.79

    Compound interest earns more by $110,516.79 - $110,000 = $516.79
     

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