Question

Aria is investing $6,700 of her savings from her summer job for her college fund. She is planning to invest the amount for 3 years and can choose between simple interest at 6.5% and compound interest at 6%. Find the difference between the two interest earning types to help Aria decide which investing option is best for her. (1 point) Aria should invest with 6% compound interest because it will result in $86.76 more in interest earnings. Aria should invest with 6.5% simple interest because it will result in $26.69 more in interest earnings. Aria should invest with 6.5% simple interest because it will result in $187.26 more in interest earings. Aria should invest with 6% compound interest because it will result in $73.81 more in interest earnings.

Answer 1

[AI-generated answer — Bot GPT 3.5]

To find the difference between the two interest earning types, we need to calculate the interest earnings for each option.

For simple interest at 6.5%, the interest earnings can be calculated using the formula:
I = P * r * t
where:
I = interest earnings
P = principal amount (initial investment)
r = interest rate (in decimal form)
t = time period (in years)

For compound interest at 6%, the interest earnings can be calculated using the formula:
I = P * (1 + r)^t - P
where:
I = interest earnings
P = principal amount (initial investment)
r = interest rate (in decimal form)
t = time period (in years)

Simple interest:
I = 6700 * 0.065 * 3
I = $1309.50

Compound interest:
I = 6700 * (1 + 0.06)^3 - 6700
I = $1407.26

The difference between the two interest earning types is:
1407.26 - 1309.50 = $97.76

Therefore, Aria should invest with 6% compound interest because it will result in $97.76 more in interest earnings.