1) You can invest in an account that pays simple interest or an account that pays compound interest. In either case, you plan to invest $3,600 today and both accounts have an annual interest rate of 8 percent. How much more interest will you receive in the 7th year in the account that pays compound interest?
Compound Interest
Value till 6th year = Present Value (1+r)6
= 3600 ( 1+ 0.08)6
= 5712.74756258
Interest in 7th year = 5712.74756258 * 8% = $ 457.02
Simple Interest
Interest every year = 3600 * 8% = 288
Difference of Interest = 457.02 - 288 = $ 169.02
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