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 $3,800 today and both accounts have an annual interest rate of 6 percent. How much more interest will you receive in the 10th year in the account that pays compound interest?
Homework Answers
Value of Investment in Simple Interest = 3,800(1 + 10(0.06))
Value of Investment in Simple Interest = $6,080
Value in Investment in Compound Interest = 3,800(1.06)10
Value in Investment in Compound Interest = $6,805.22
Difference in Interest = 6,805.22 - 6,080
Difference in Interest = $725.22
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