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30 April, 05:02

Jim and Bill each invest $15,000 into savings accounts that earn 3.5% interest. Jim's account earns simple interest and Bill's account earns compound interest. After 25 years, who will earn more interest and how much more will he earn?

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  1. 30 April, 08:41
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    Bill will earn more interest

    He will earn $ 20,448.67 from his investment

    Step-by-step explanations

    Firstly let us calculate Jim's earnings based on simple interest

    A = P (1 + rt)

    Calculation:

    First, converting R percent to r

    a decimal

    r = R/100 = 3.5%/100 = 0.035 per year.

    Solving our equation:

    A = 15000 (1 + (0.035 * 25)) = 28125

    A = $28,125.00

    The total amount accrued, principal plus interest, from simple interest on a principal of $15,000.00 at a rate of 3.5% per year for 25 years is $28,125.00 for Jim

    Now let's us calculate bill's investment based on compound interest

    Equation

    A = P (1 + r) ^t

    A=15000 (1+0.035) ^25

    A=15000 (1.035) ^25

    A=15000*2.36324498427

    A = $ 35,448.67

    We see that Bill will earn

    $ 20,448.67 from his investment
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