Answer:
Option A earns higher interest($84115.58)
the difference in interest between the two option is $197.9
Step-by-step explanation:
In the problem we are going to apply both the simple interest formula and compound interest formula and compare which has the best/higher returns
Given data
Principal P= $43,000
Rate r= 6%= 0.06
time t= 3years
n= 4 (applicable for compound interest compounded quarterly)
solving for option A gives her 6% compounded quarterly
the compound interest formula is
[tex]A= P(1+\frac{r}{n} )^n^t\\A= 43000(1+\frac{0.06}{4} )^{4} ^*^3[/tex]
[tex]A=43000(1+0.015)^{12} \\A=43000(1.015)^{12} \\A=43000*1.1956\\A= 51411.58[/tex]
Interest is [tex]A-P= 51411.58-43000= 8411.58[/tex]=$8411.58
solving for option B which gives her 6% simple interest annually
the simple interest formula is
[tex]A=P(1+r)^{t} \\A=43000(1+0.06)^3\\A=43000(1.06)^3\\A=43000*1.191\\A= 51213.68[/tex]
Interest is[tex]A-P=51213.68-43000= 8213.68[/tex]= $8213.68
calculating the diference in interest between the two options we have
[tex]8411.58-8213.68= 197.9[/tex]= $197.9
Option A earns higher interest
