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1)   You can invest in an account that pays simple interest or an account that pays compound...

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?

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Answer #1

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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