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Tammy sold a diamond ring for $10,000. She placed half of the money into a cd with a 3. 9% interest rate compounded daily. She placed the other half into a cd with the same interest rate but compounded monthly. What is the difference in the interest earned on each amount after 4 years?.

Respuesta :

The difference in the interest earned on each amount after 4 years is  $1.43. Then, option a is the correct option.

Compound interest is when one receives interest on both interest income and savings.

Consider that you have $1,000 in a savings account earning 5% interest annually. If you earned $50 in the first year, your new balance would be $1,050.

This compound interest can be calculated by,

[tex]A=P\left(1+\frac{r}{n}\right)^{nt}[/tex]

Where,

  • A is the final amount.
  • P is the initial amount.
  • r is the rate of interest.
  • n is the number of times interest is applied.
  • t is the time period.

For the first half, P is $5,000, r is 3.9%, n is 365 (daily), and t is 4 years.

Then, compound interest for this case is,

[tex]\begin{aligned}A&=\$5000\left(1+\frac{0.039}{365}\right)^{4\times365}\\&=\$5,844.09\end{aligned}[/tex]

For the second half, P is $5,000, r is 3.9%, n is 12 (monthly), and t is 4 years.

Then, compound interest for this case is,

[tex]\begin{aligned}A&=\$5000\left(1+\frac{0.039}{12}\right)^{4\times12}\\&=\$5,842.65\end{aligned}[/tex]

Then, the difference is $5,844.09 - $5,842.65 = $1.43.

The complete question is -

Tammy sold a diamond ring for $10,000. She placed half of the money into a cd with a 3. 9% interest rate compounded daily. She placed the other half into a cd with the same interest rate but compounded monthly. What is the difference in the interest earned on each amount after 4 years?

a. $1.43 b. $2.85 c. $125.31 d. $128.16

To know more about compound interest:

https://brainly.com/question/22621039

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