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There are two investment alternatives. The first one earns simple interest on $10,000 for four years at 8%. The compound interest on S 10,000 at 7.5% for three years after which the funds are put in a trust account offering zero returns pay more by the end of the fourth year and by how much? one eams which one will Select one: O a. Simple interest by $777.03. O b. Simple interest by $155.69. O c. Compound interest by $154.69. O d. None of the choices given. O e. Compound interest by $22.97.
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Answer #1

Investment under Simple Interest: Investment (I) is S 10,000 / Simple interest rate 15-8% No of years is = 4 Maturity value is = 1 + (1 * Interest rate * No of years) Maturity value is-10000+( 10000*S%*4) Maturity value is = 13,200 /. Investment under Compound Interest Investment is 10,000 / Compoun d interest rate is 7.50% No of years is 3 Maturity value is-Investment(1+r)n Maturity value is- (10000 (1+0.075)A3) Maturity value is- S 12,423 Investment under Simple interest rate will pay by an excess of $ 777.03/. Than compound interest rate. Option a) is the Answer

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