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What will be the simple interest earned when you invest $1,000 for 3 years at 10 percent and the compound interest earned whe
same sum for 2 years at 5 percent ?
The simple interest earned when you invest $1,000 for 3 years at 10 % is $
The interest compounded when you inve
for 2 years at 5 % is $

The simple interest earned when you invest $1,000 for 3 years at 10 % is $300.

The interest compounded when you invest for 2 years at 5 % is $102.5.

Explanation:

(i) Formula for simple interest : , where P= Principal amount , r= rate of interest (in decimal) and t = time.

(ii) Formula for compound interest : , where P= Principal amount , r= rate of interest (in decimal) and t = time.

Given , P=  $1,000 for t=3 years at r= 10 percent = 0.10 ( in decimal)

Then , Simple interest will be :

 [By using (i)]

Thus, The simple interest earned when you invest $1,000 for 3 years at 10 % is $300.

Also, Given , P=  $1,000 for t=2 years at r= 5 percent = 0.05 ( in decimal)

Compound interest will be :

[By using (ii)]

Hence, interest compounded when you invest for 2 years at 5 % is $102.5.

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