Find 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)
To find the best balance after 7 years at two different interest earning types, we need to calculate the balance for each type separately and compare them.
For simple interest:
Balance = Principal (1 + interest rate * time)
= $12,000 * (1 + 0.05 * 7)
= $12,000 * (1 + 0.35)
= $12,000 * 1.35
= $16,200
For compound interest:
Balance = Principal (1 + interest rate)^(number of periods)
= $12,000 * (1 + 0.045)^(7)
≈ $12,000 * (1.045)^7
≈ $12,000 * 1.3323944
≈ $15,988.73
Rounding the answer to two decimal places, the best balance after 7 years is $15,988.73 for compound interest.