You are investing $1,000 at 4% for thirty years. Over those thirty years, how much "extra" will you earn in compound, versus simple, interest? (Recall you are earning simple interest at 4% for 30 years, and compound interest - or interest on the interest - as well. How much "interest on the interest" do you earn over 30 years?)
You are investing $1,000 at 4% for thirty years. Over those thirty years, how much "extra" will you earn in compound, versus simple, interest? (Recall you are earning simple interest at 4% for 30 years, and compound interest - or interest on the interest - as well. How much "interest on the interest" do you earn over 30 years?)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Transcribed Image Text:You are investing $1,000 at 4% for thirty years. Over those thirty years, how much "extra" will you earn
in compound, versus simple, interest? (Recall you are earning simple interest at 4% for 30 years, and
compound interest - or interest on the interest - as well. How much "interest on the interest" do you
earn over 30 years?)
O $1,200
O $2,200
O $2,243
O $1,043
O $3,243
Expert Solution
Step 1
Simple Interest total maturity amount
= Principle * (1 + rate * Time)
Compound interest maturity amount
= Principle * (1 + Rate)^time
Step by step
Solved in 4 steps
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