Question

If you were looking to invest money and you could get simple interest or compound interest...

If you were looking to invest money and you could get simple interest or compound interest and both investments had the same risk, which would you chose?

Homework Answers

Answer #1

In simple interest the interest is calculated as amount of investment multiplied by interest rate. This mean the interest is paid only on the investment amount.

In compound interest the interest is calculated on both principal and interest earned. This means the amount of interest earned is added to value of investment to calculate the interest amount. It pays interest on interest.

The value of investment at end would be higher under compound interest rather than simple interest. If both the investment has same risk then it would be preferable to chose investment with compound interest to earn higher return on investment.

Thus, investment paying compound interest would be preferred.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You can invest in an account that pays simple interest or an account that pays compound...
You can invest in an account that pays simple interest or an account that pays compound interest. In either case, you plan to invest $3,000 today and both accounts have an annual interest rate of 9 %. How much more interest will you receive in the 11th year in the account that pays compound interest?
If you were to invest $1000 for 3 years would you rather receive simple interest or...
If you were to invest $1000 for 3 years would you rather receive simple interest or compound interest for your investment? why?
You can invest in an account that pays simple interest or an account that pays compound...
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
You can invest in an account that pays simple interest or an account that pays compound...
You can invest in an account that pays simple interest or an account that pays compound interest. In either case, you plan to invest $658 today and both accounts have an annual interest rate of 5.5%. How much more interest will you receive in the 7th year in the account that pays compound interest? Round your answer to the nearest penny, and do not type the "$" sign?
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?
Define compound interest and investing. Could you sacrifice something you spend money on today (lattes, cigarettes,...
Define compound interest and investing. Could you sacrifice something you spend money on today (lattes, cigarettes, lottery tickets, fast food, etc.) in order to invest a bit each month? What would it mean to you to feel secure about your retirement?
Seeking to either borrow or lend money at a given annual compound interest rate or a...
Seeking to either borrow or lend money at a given annual compound interest rate or a simple interest rate over a term of 5 years will result in a preference for selecting: the simple interest rate for the borrowing and the annual compound interest rate for lending money. the annual compound interest rate for the borrowing and the simple interest rate for lending money. the annual compound interest rate for both borrowing and for lending money. the simple interest rate...
How much money would you have to invest today, at an interest rate of 5% in...
How much money would you have to invest today, at an interest rate of 5% in order to reach your goal of $1,000,000 in 30 years? Assume you don't put any additional money into this investment. $123,737.45 $321,377.45 $231,377.45 $132,733.45 How much money would you need to invest every year in order to reach your goal of $1,000,000 in 30 years at the same interest rate of 5%, if you had no money up-front TODAY to invest? (PV=0) $15,051.44 $231,377.45...
5. James wants to invest $85000. He can invest the money at 7.3% with interest compound...
5. James wants to invest $85000. He can invest the money at 7.3% with interest compound monthly for 30yr or he can invest at 7.1% with interest compounded continuously for 30yr. Which option results in more total interest? Show your work 10. Solve the problem. The population of a country is modeled by the function P(t) = 17.9e 0.01264t where P(t) is the population (in millions) t years after January 1, 2000. Use the model to predict the year during...
Given a similar interest rate and time: Would you prefer a simple interest or compound interest...
Given a similar interest rate and time: Would you prefer a simple interest or compound interest loan ? Why?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT