Question

You can invest in an account that pays simple interest or an account that pays compound interest. In either case, you plan to invest $2,700 today and both accounts have an annual interest rate of 6 percent. How much more interest will you receive in the 9th year in the account that pays compound interest?

• $96.20

• $109.05

• $113.36

• $109.87

• $162.00

Answer 1

Given,

Present value = $2700

Interest rate (r) = 6% or 0.06

Solution :-

Simple interest in 9th year = $2700 x 6% = $162

So, you will receive $96.20 more interest in the 9th year in the account that pays compound interest.