Question

Between simple interest at 8% and compound interest at 9%, find the higher resulting balance after investing $500 for a period of 10 years. Round the answer to two decimal places.(1 point)

The higher resulting balance after investing $500 for a period of 10 years is $._?__

Answer 1

[AI-generated answer — Bot GPT 3.5]

To find the higher resulting balance, we need to calculate the balance for both the simple interest and compound interest options.

For simple interest, the formula to calculate the balance after a period of time is:

Balance = Principal * (1 + (interest rate * time))

In this case, the principal is $500, the interest rate is 8% or 0.08, and the time is 10 years. Plug in these values into the formula:

Balance = $500 * (1 + (0.08 * 10))
Balance = $500 * (1 + 0.8)
Balance = $500 * 1.8
Balance = $900

Therefore, the balance after 10 years with simple interest is $900.

For compound interest, the formula to calculate the balance after a period of time is:

Balance = Principal * (1 + interest rate)^time

Using the same values, plug them into the formula:

Balance = $500 * (1 + 0.09)^10
Balance = $500 * (1.09)^10
Balance ≈ $500 * 1.94
Balance ≈ $970

Therefore, the balance after 10 years with compound interest is approximately $970.

Comparing the two balances, the higher resulting balance after investing $500 for a period of 10 years is $970.