Question

ind the best balance after investing $12,000 for a period of 7 years at two different interest earning types: simple interest at 5% and compound interest at 4.5%. Round the answer to two decimal places.(1 point)

Answer 1

[AI-generated answer — Bot GPT 3.5]

To find the best balance, we need to calculate the future value using both simple interest and compound interest and compare the results.

1. Simple Interest:
The simple interest formula is:
Future Value = Principal * (1 + interest rate * time)
Future Value = $12,000 * (1 + 0.05 * 7)
Future Value = $12,000 * (1 + 0.35)
Future Value = $12,000 * 1.35
Future Value = $16,200

2. Compound Interest:
The compound interest formula is:
Future Value = Principal * (1 + interest rate)^time
Future Value = $12,000 * (1 + 0.045)^7
Future Value = $12,000 * (1.045)^7
Future Value = $12,000 * 1.33935785204
Future Value = $16,072.29

Comparing the two results, we can see that the balance after 7 years is higher with compound interest at 4.5%. The best balance is therefore $16,072.29.