You are given a choice of taking the simple interest on $100,000 invested for 5 years at a rate of 2% or the interest on $100,000 invested for 5 years at an interest rate of 2% compounded daily. Which investment earns the greater amount of interest? Give the difference between the amounts of interest earned by the two investments
Simple interest balance after 5 years at 2% is $110,000.
Daily compounded interest for 5 years at 2% is 365 days per year * 5 years = 1,825 days = $110,516.79
Compound interest earns more by $110,516.79 - $110,000 = $516.79
Simple interest balance after 5 years at 2% is $110,000.
Daily compounded interest for 5 years at 2% is 365 days per year * 5 years = 1,825 days = $110,516.79
Compound interest earns more by $110,516.79 - $110,000 = $516.79