Answer:
i) $500 at 5% simple interest for two years. Interest = 550 - 500 = $50
ii) $500 at 3% compounded monthly for 2 years.
Interest = 530.88 - 500 = $30.88
Step-by-step explanation:
i) $500 at 5% simple interest for two years.
Initial amount, P = $ 500
Rate of interest, r = 0.05
Time in years, t = 2
Therefore Final amount A = P(1 + rt) = 500(1 + (0.05 [tex]\times[/tex] 2) ) = $550
Therefore Interest = 550 - 500 = $50
ii) $500 at 3% compounded monthly for 2 years
Initial or Principal Amount, P = $500
Rate of interest, r =0.03
number of conversions, m = 12
Time in years, t = 3
Therefore final amount, [tex]A = P(1 + \frac{r}{m}) ^{mt} = 500( 1 + \frac{0.03}{12} )^{(12\times2)} = 500( 1 + \frac{0.03}{12} )^{24}[/tex] = $530.88
Therefore Interest = 530.88 - 500 = $30.88
