Question

Question 21 (1 point) Calculate the amount of interest if $700.00 is invested at 5.5% for two years and nine months.

Answer 1

Hi There,

Here is my answer to the given question.

Given Values :

Amount Invested = $ 700.00

Rate of Interest = 5.5 %

Period of Investment = 2 years 9 months

Calculation of amount of interest :

Simple Interest Method = Investment * Rate of Interest * Period of investment

= $ 700 * 5.5% * 2.75 Years

= $ 105.875

Compound Interest Method = P * (1+R)^N ( Assumption is compounding interest annually)

P = Amount Invested

R = Rate of Interest

N = Period

= $ 700 * (1+5.5%)^2.75

= $ 111.04

Considering the facts, if the investment is based on Simple interest method he would be getting at the end of 2 years 9 months of amount $ 105.875 and if the investment is based on Compound interest method he would be getting at the end of 2 years 9 months of amoungt $ 111.04. But ultimately he would get an extra interest element of $ 5.165 if interest is cumulated annually.