Question

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Answer 1

According to the problem, the principal is $800, that's the investment.

For the first case (a), we have a simple interest rate of 4% and a time of 3 years. Let's use the simple interest formula

$A=P(1+rt)$

Then, let's replace the given values

$A=800(1+0.04\cdot3)=800(1+0.12)=800(1.12)=896$

They will have $896.

On the other hand, for the second case (b), the compound interest is 3% compounded annually for 5 years. Let's use the compound interest formula

$A=P(1+\frac{r}{n})^{n\cdot t}$

Where P = 800, r = 0.03, n = 1, and t = 5.

$\begin{gathered} A=800(1+\frac{0.03}{1})^{1\cdot5} \\ A=800(1.03)^5=927.42 \end{gathered}$

Hence, they will have $927.42 if the interest compounds annually.